Financial institutions that provide wealth management services to consumers understand that the future of the industry will be won by capturing the mass affluent market, the largest wealth segment in the United States.
A new whitepaper from Capco argues that wealth management firms and other financial institutions have a rare gold mine opportunity to win this underserved but potentially $70 trillion market. The mass affluent segment is the high end of the mass market cohort, who will soon inherit wealth from their baby boomer parents.
The paper, Why Holistic Financial Wellness Needs a Remake , finds that traditional wealth management services such as portfolio protection, insurance planning, and retirement building, will not be enough to entice younger clients.
The main takeaway: These customers want hyper personalized advice that is easily accessible over multiple channels. But that’s just a starting point. What’s new here is that they want artificial intelligence-driven services that are holistic, inclusive of their overall life goals, not just financial information.
49% of wealthy investors prefer a single financial institution to serve most of their financial needs, which include investment management, financial planning, and banking. However, only one-third of wealthy customers engage in firms that do so. Additionally, 66% of investors under age 30 also want a one-stop financial shop.
Enter the concept of the one-stop-shop, a digital platform created around a strategy of holistic financial wellness. Platforms provide access to banking, insurance, financial planning, retirement, and other self-help tools. Large financial management firms are already creating these for their clients, either on their own or in partnership with product and technology vendors.
The next step for the industry is to create digitally powered, hyper personalized experiences that feature an engaging interface, insights that are proactive as well as deep, and touchpoints with human advisors who are at the forefront of this experience.
Wealth managers focused on financial wellness can utilize socioeconomic data and life-event mechanisms to connect to customer offerings. In addition, a holistic approach must include a behavioral component, such as educating customers on their positive and negative financial behaviors. Providing generic advice (“Time to set up an emergency fund!”) is no longer sufficient. Content around financial education must be specific and valuable to the individual customer and their financial needs.
Offering customers a one-stop-shop financial service tool elevates the customer-advisor relationship beyond merely transactional: the tool facilitates engagement and loyalty to the brand. From the user’s perspective, financial management is suddenly much simpler and more powerful. All the resources necessary for achieving holistic wellness can be found on one app instead of many. Powered by AI, the app offers advice beyond what a financial advisor might offer for non-financial life events.
