By Vikas Sahay, SVP, Banking & Financial Services, Virtusa
With the oldest Baby Boomers having turned 75 in 2021, we are on the crux of one of the most significant generational wealth transfers in history. Over the next 20 years, approximately $70 trillion will be exchanged between Baby Boomers and Gen X and Millennial account holders.
With a future that is expected to be 100% digital and a clientele increasingly focused on financial wellness, it’s time for banking and financial institutions to prepare for the dawn of next-generation investors.
A transition from incremental to sudden wealth
Baby Boomers have typically accumulated wealth over their lifetimes, with reasonably straightforward investments: a portfolio of stocks and bonds, along with a 401(k) or IRA for retirement. Millennials will experience the fastest growth rate of net wealth accumulation, which will continue to rise over the next 50 years.
With this sudden surge in wealth, these inheritances promise to dramatically change the financial landscape with more sophisticated and diverse investments.
The acceleration of digital technology and new apps rapidly coming onto the market make it more accessible than ever for people to buy, borrow, and invest. Forward-looking financial institutions must embrace the intrinsic value of personalization, artificial intelligence, and digital transactions to keep pace with consumer expectations.
At the same time, this generational transfer of wealth comes with an emotional undercurrent as family dynamics shift and the older generation passes on. Banks that succeed will prioritize customer experience with intuitive solutions that streamline both day-to-day banking and long-term investments in the following ways:
Building relationships across the generations
This generational shift is not only for wealthy clientele—70% of wealth advisors will also retire in this timeframe. This will spawn a new breed of advisors, most of whom are expected to be Millennials, looking for a newer set of advisory and analytics platforms to serve their customers better.
By working closely with clients and inheritors, banking advisors can help plan for the transfer of wealth, improve asset retention and potentially retain future business. Advisors can mine for new growth channels and serve various customer segments simultaneously by prioritizing data, automation, and personalization. Leveraging a robust data infrastructure provides real-time, predictive analytics—banks can genuinely understand their customers and provide personalized solutions that scale inter-generationally.
Customer-centric, digital investments
Gen X and Millennial customers expect digital experiences—73% are more likely to communicate digitally than in-person. While the financial services industry has been slow to adopt a fully integrated digital experience, as the younger generation earns more wealth, they expect online …….