Wealth managers must transform to retain next gen windfall

Wealth firms need to adapt to increasing appetite for alternative investments, sustainable projects and philanthropy among next generation cohorts of investors.

Wealth managers must rapidly evolve digital and investment offerings or risk losing a significant portion of their future client base, warns Capgemini. According to the consultancy, the wealth management industry is on the cusp of an unprecedented generational shift, with an estimated $83.5tn in wealth set to transfer between generations by 2048.

The urgency for transformation is immediate. “Some of this is really imminent,” says Gareth Wilson, London-based global banking industry leader at Capgemini, noting that by 2030, more than a third of those assets will have changed hands.

Inheritors of this wealth, spanning Gen X, millennials and Gen Z, bring distinct perspectives and expectations. Their outlook is characterised by a strong preference for digital engagement and personalised service. Mr Wilson highlights the risk that “the existing capabilities that reside within the wealth management firms don’t necessarily deliver that experience, don’t necessarily deliver the breadth of services and products that future generations will require”.

This challenge extends beyond client expectations to internal hurdles within wealth management firms. According to Capgemini's latest World Wealth Report, 47 per cent of relationship managers (RMs) express dissatisfaction with the digital tools and technologies currently at their disposal. This internal dissatisfaction can have significant consequences for client retention and service quality, underscoring the critical need for firms to invest in equipping RMs to be relevant to the next generation.

Alternative action

According to the report, there is growing appetite for alternative investments among next generation clients, aged below 60, who exhibit a greater interest in assets such as private equity, private credit, and digital assets. Some 88 per cent of RMs say next gen high net worth clients are more interested in alternatives than so-called ‘baby boomers’ in their 60s.

In response, several large institutions, including Goldman Sachs and BNY Mellon, have developed platforms aimed at broadening access to these asset classes.

However, Mr Wilson cautions that the rise of private markets necessitates education, as both investors and advisers need to fully understand the risks, liquidity constraints and complexities inherent in such investments. Consequently, wealth managers are investing in educational initiatives, shifting their role from simply managing assets to becoming trusted guides.

The shift in wealth ownership also has a geographic dimension. Emerging wealth hubs such as Singapore, Hong Kong and the UAE are increasingly influential, as wealthy individuals seek opportunities for global diversification. Mr Wilson points to a "changing demographic" not only in terms of age and investment preferences but also a broader, more global outlook. While tax considerations play a role, the primary motivation is desire for growth and diversification beyond traditional home markets.

Beyond investment choices, the next generation of wealthy clients is demanding their wealth be used in ways that align with their values. Sustainable investing and philanthropy are rising in importance, with clients seeking to make positive social impacts alongside financial returns. This is prompting wealth managers to expand their service offerings to include environmental, social and governance strategies and philanthropic advisory.

This broadening of client expectations extends into lifestyle and experiential domains. As global wealth grows by an estimated 2.6 per cent during 2025, the luxury sector stands to benefit from increasing demand for concierge services, medical access, and exclusive experiences, pushing wealth management firms to incorporate lifestyle management into their offerings, says Mr Wilson.

Fundamental threats

Despite these evolving opportunities, the wealth management industry faces a fundamental threat: client loyalty. Capgemini’s data reveals that 81 per cent of next generation inheritors intend to switch wealth firms within one to two years of receiving their inheritance, largely due to a misalignment between their expectations and the services provided, particularly in digital engagement and product breadth.

Compounding this challenge is a looming talent crunch within the industry. Nearly 50 per cent of relationship managers in North America are expected to retire by 2040. Many current advisers feel ill-equipped to serve evolving needs of younger clients, creating what Mr Wilson describes as "a bit of a perfect storm". This generational gap among advisers threatens to widen the divide between client expectations and firm capabilities, further accelerating the risk of client attrition.

Technology, particularly generative artificial intelligence (AI), offers a potential solution. Mr Wilson is optimistic about AI’s transformative potential, not only in enhancing back-office efficiency but also in revolutionising client engagement. AI can sift through vast amounts of structured and unstructured data to create hyper-personalised profiles, enabling advisers to deliver tailored investment advice and more meaningful interactions, he says.

Moreover, AI can reduce administrative burdens by automating document management and operational tasks, freeing up RMs to focus on high-value client relationships.

"Fundamentally, it’s about giving the RM better information at the most appropriate point in time," Mr Wilson explains. Crucially, he emphasises that while AI will augment advisory capabilities, the human element remains essential, especially for complex wealth management decisions and building trust with clients.