Wealthy millennials turn to fintech solutions
Pricing strategy specialists Simon-Kucher & Partners have researched high net worth millennials globally asking them what they want and expect from banks and how can banks foster long term relationships with them.
The firm defines millennials as those born between 1981 and 1996 and reports that the findings from their survey are alarming with 60 per cent of millennials not happy with their current wealth management services (in the UK, the figure is 56 per cent).
This is also reflected in millennials’ lack of loyalty to a single wealth management provider. On average, each millennial has more than three private banking relationships, while in the UK, the average is three.
“Especially in today’s turbulent market environment, banks need to rethink their offerings to satisfy their future customers,” says Silvio Struebi, Partner and head of banking operations for the APAC region at Simon-Kucher.
“The future survival of private banks will depend on whether they’re able to master the art of winning millennials and keep them as customers,” adds Desi Soetanto, Consultant at Simon-Kucher, who spearheaded this study. The study shows that millennials will only give banks one chance to impress them, and thus private banks need to get a hold of this next generation before it’s too late,” says Soetanto.
The study finds that a vast improvement in the current private bank offering is required to attract millennials. Otherwise, this group of customers will shift their wealth to alternative solutions.
Three out of five participants are not satisfied with traditional wealth managers, and 80 per cent are using or considering using fintechs to manage their money. These millennials are planning to allocate 56 percent of their investable assets into fintechs, meaning private banks can expect to lose a substantial customer group. Asia is engaging in its largest intergenerational wealth transfer in history, which means that by 2046, the baby-boomer generation will have passed on USD30 trillion to millennials.
Moreover, by 2020, millennials will make up 50 per cent of the total global workforce, which means they will be driving the new generation of wealth creation.
“To capture the attention of this high-net-worth generation, private banks have to significantly upgrade their customer experience,” says Max Biesenbach, partner at Simon-Kucher & Partners and head of UK Banking and Financial Services practice. The study reveals that millennials highly value quality and brand. Banks need to learn from brands that millennials love, such as Apple or Netflix, by adopting certain practices that these innovative companies are providing. According to Soetanto, in order to successfully upsell and retain clients’ loyalty, private banks need to add what he calls ‘WOW’ factors to the customer experience.
Soetanto has identified a number of extraordinary ‘WOW’ factors that private banks can offer to hook millennials, including 24/7 access, the option to select their preferred relationship manager, customized recommendations, fee transparency, and comprehensive and exclusive offerings. Across the board, banks are performing poorly in addressing these factors. Surprisingly, price was consistently ranked as the least important factor by millennials when selecting private banking services.
“To win in the race of attracting and retaining customers, private banks need to revamp their customer experience, which includes changing the relationship managers’ sales approach and accelerate the path towards digitalisation to provide customers with tailor-made offerings,” conclude Struebi, Biesenbach and Soetanto.