This article was written by Julien Serbit, portfolio manager at Geneva-based Prime Partners.
Wealth management codes and financial institutions’ offers are changing in response to the rising power of the millennial generation.
For example, performance criteria, portfolio construction and relationship management tools are all evolving to match the new requirements from these clients.
Here are some major trends to watch.
A new approach
We often find that millennials are interested in ESG-compliant investments. They also need a digital and personalized approach, and they want to understand their investments thoroughly. Some practices from the past are no longer desirable, such as pure speculative investments or soft commodities trading.
But adapting existing codes of conduct and digitalizing the banking offering isn’t enough to attract millennials – it’s also about the chemistry between bankers and these valuable clients.
Keen on performance
Millennials are not spending money in the same way that their parents did. Even so, performance remains at the heart of wealth management. It's what millennials expect from their bankers.
The challenge for portfolio managers lies in finding products that combine appropriate investment philosophies with concrete results.
The massive wave of ESG products that has been launched over the past two years is a welcome development, but selectors must now carefully assess a fund manager’s methodologies toward integrating ESG criteria in order to identify the true performers.
More than meets the eye
Reducing millennials to nothing more than young people obsessed with green investments, tech stocks and the sharing economy is a thinking shortcut and an error by omission.
Performance remains central and it should not be overlooked. The wealth management environment has been changing over the past five years and continues to evolve in terms of both supply and demand.
Services provided by financial institutions are adapting, and the social impacts of your investments are more important to consider than ever before. However, generating alpha and capital growth will still be a key factor in ensuring that younger clients agree to pay their bankers in the coming years.
All in all, managing millennial clients seems to be more challenging for bankers. These young clients are more conscious of what they want from the financial industry and are more educated about products and fees. In short, they are forcing the industry to adopt a more specific investment scope.