Private banks prepare for next gen revolution

Engaging younger family members through tailored programmes is becoming increasingly important for leading wealth management firms.

With $83tn in wealth set to change hands over the next 20–25 years, engaging the next generation is becoming critical for private banks and wealth managers. Yet most inheritors switch advisers after receiving their inheritance, posing a significant challenge for the industry.

Advisers are often facing a dilemma: balancing immediate performance targets against the need to cultivate relationships with younger family members, who may not yet generate revenue. Private bankers are meanwhile under intense pressure from their bosses to improve margins, while also investing in long-term growth strategies. This challenging dynamic was a key focus at the recent PWM and FT Live Global Wealth Management Summit, where experts examined potential solutions, including rethinking KPIs and learning from multi-family offices (MFOs).

When referring to the next generation, this typically implies Gen Z, loosely those born between 1995 and 2010. But private banks say inheritors are, on average, around 59 years old, highlighting a critical challenge: by the time wealth is transferred, these individuals are often already aligned with their own financial advisers, likely to differ from those of their parents, said David Durlacher, Julius Baer International’s CEO. Similarly, 70 per cent of women change advisers after the loss of a spouse. The decision to switch advisers is driven by corporate strategy, not metrics, he said.

“What is the emphasis of a corporate strategy, is it on people, or is it on profit? The fundamental question for our industry has to be around relevance,” maintained Mr Durlacher. If advisers remain relevant to both partners in a joint account and across generations in a multi-generational relationship, they have little to worry about, he said.

"Our problem is that we are focused only on one element of relevance, and generally, KPIs are all focused on one person." Over the years, he has often observed private bankers focusing on just one family member during client meetings. “That is not good enough,” he remarked.

Building meaningful, multi-generational connections and tailoring KPIs to include next-generation engagement were identified as vital steps to ensuring relevance across all family members and generations. Next generation programmes are an “inevitable” route for today’s wealth managers, as they are the only way to engage with the next generation, understand their preferences and build connections, said Sheheryar Rasul, CEO, global wealth management, and country manager, Switzerland, Habib Bank AG Zurich.

“KPIs should start reflecting these goals,” he added.

“What is the emphasis of a corporate strategy, is it on people, or is it on profit?” – David Durlacher, CEO, Julius Baer International

Entrepreneurial innovation

Lucratia Mathe, head, client value proposition, wealth and investment at Standard Bank Group, stressed the importance of understanding individuals and their psychological mindset.

The South African bank is reshaping its approach to wealth education through bespoke Leadership Academies, tailored for young people aged 10-24 and women in wealth. These programmes are built on four pillars: psychological understanding, financial education, entrepreneurial management and philanthropy.

The first pillar focuses on self-awareness. “We want the next generation to navigate the world on their own terms, not through the power of their parents,” explained Ms Mathe. Financial education goes beyond technicalities of wealth management, addressing individuals’ relationships with money to help preserve and grow their wealth in the long term.

Entrepreneurial management is critical in Africa, where first- and second-generation wealth creators dominate. “A rising tide lifts all boats,” continued Ms Mathe. “We need to foster entrepreneurial innovation that creates multiple rising tides,” benefiting entire communities. “This is what Africa requires.”

The final pillar, philanthropy, teaches the next generation about social responsibilities of wealth in a region marked by stark inequalities. “With wealth comes responsibility, and it must be used wisely,” she said.

Family affairs

The rise of family offices (FOs) has reshaped wealth management, focusing on intergenerational engagement. Özge Doğan, founder of Turkey-based multi-family office Karman Beyond, urged private bankers to involve younger family members early. “We’re already influencing decisions. Parents want their children to expand their horizons and contribute to the family legacy,” she said.

Family offices and MFOs operate with a markedly different approach to private banks, focusing on preserving and growing family wealth sustainably rather than targeting annual growth rates of 10-15 per cent. Their profitability models reflect this distinction, said Mr Rasul of Habib Bank.

“The size and structure of family offices allow them to be a little more client centric,” he noted, adding that banks increasingly look to FOs for inspiration, not solely the reverse. However, challenges persist around compliance, linked to KYC (know your client) requirements, particularly when engaging with multi-family offices (MFOs) on banking platforms.

“You never feel the client is yours. There's always someone who knows the client better, and so in relatively conservative setups and organisations, that sometimes comes in the way.”

Open architecture – which offers wealth managers the flexibility to collaborate with a diverse pool of external professionals – is critical for success in this space, argued Ms Mathe of Standard Bank. Banks, she said, must acknowledge their limitations by recommending external expertise to meet FO needs.

“Parents want their children to expand their horizons and contribute to the family legacy” – Özge Doğan, founder, Karman Beyond

Emotional intelligence

Yet, long-term family goals often conflict with the shorter-term horizons typical in banking, noted Ms Doğan of Karman Beyond. This misalignment led her own family to establish their MFO. Comparing MFOs to Michelin guides, she explained that they do not run the restaurant but determine the best one for each client’s needs.

There should be a clear delineation of roles between asset managers and MFOs, she added. Private banks excel in asset management, while MFOs specialise in understanding and managing the dynamics of the family itself and should remain focused on this core function. That said, there is substantial potential for private banks and MFOs to collaborate more effectively.

But Julius Baer’s Mr Durlacher highlighted another tension: advisers, well versed in investment management and capital markets, may struggle with the nuanced psychology of family wealth and legacy planning. To stay relevant across generations, he argued, training should prioritise emotional intelligence (EQ) over purely technical expertise, enabling advisers to address complex family issues and help clients articulate the purpose and vision for their wealth.

“Ultimately, our industry will be replaced in its IQ by technology. To remain relevant, we must demonstrate leadership in EQ,” he said.