Gen-Zs love investing. In the US alone, 56% of Gen-Zs over the age of 18 invest in some capacity. Across Canada and the UK, it’s a similar story. But they’re not using wealth managers. With less than one in five contacting a professional, they’re going down the DIY route and two thirds (65%) report use investment apps instead. Staying relevant to this curious and value-driven crowd is fundamental for wealth managers today. As an estimated $10.6 trillion is set to change hands, we’re looking at how firms can deliver a service suited to the newest investors.
In our experience as wealth tech providers, here are five areas ripe for modernisation.
1. Self-service wealth management
For many young investors, self-service platforms help them save on fees. The majority are already buckling under impossible rents and rampant inflation, while around half are financially forced to live in their parents’ house. In our opinion, managers who create the best digital self-service platforms today, could reap the most rewards tomorrow.
The median Gen-Z investment pot in the USA is worth just $4,000. But there are around 46 million of them, creating a combined $184 billion. And given that around half of these young investors self-report as high-risk, long-term returns could be substantial. In the UK, median invested assets are smaller at £1,367. There are roughly 4.7 million Gen-Z accounts, meaning £6.4 billion left on the table.
So far incumbent firms have struggled to find their place with this new market. But it’s a worthwhile venture, securing loyalty at this early DIY stage makes it easier to upgrade these investors to lucrative managed accounts in the future.
2. Hyper-personalised support
From food deliveries to streaming sites, technology has created highly personalised suggestions and solutions for us. Gen-Zs have come to expect this service from digital wealth platforms, but almost all generations appreciate it. Across all ages, 90% of High-Net-Worth clients reported that hyper-personalisation appeals to them. Investing in a blend of Artificial Intelligence (AI), Machine Learning and Open Banking principles can empower wealth managers to offer this much-desired feature.
With data analysis, firms swiftly identify the unique stumbling blocks Gen-Zs encounter. Then using AI, they can step in when needed with bot chats, suggestions or risk alerts. Supporting investors with hyper-personalisation pays for itself over time, a study by Capgemini found it increases client loyalty ten-fold.
In terms of assets under management (AUM), helping investors make better decisions probably means more profit too. It’s a win-win.
3. Automated reporting
To attract Gen-Zs from outside the office walls, it helps to keep them engaged from the inside. This is where automated reporting comes in. Astonishingly, one in five of the under-27s who quit their job in 2022 cited having to work with “useless” technology as a main reason. Over a third of the complaints stemmed from having to do mundane and time-consuming tasks that should have been automated.
As well as keeping employees engaged and happy, automated reporting also helps to highlight valuable Gen-Z insights. Young Millennials and Gen-Zs are different from their predecessors in that they often need to rely on multiple sources of income to get by. Research from Visa found nearly half (45%) have a side-hustle bringing in an extra £230 monthly, and 37% have more than one. Meanwhile, half of the UK’s Gen-Z investors trade cryptocurrencies with the goal of earning extra income. Automated reporting can help managers understand the unique financial needs and situations of this group.
4. Instant top-ups
Even incumbent banks now provide instant transactions, payments and account top-ups. So, in the eyes of Gen-Zs it would be baffling for them to have to wait for funds to clear. Most of this group have never experienced it before.
We believe that instant digital services, and especially top-ups, are essential for today’s wealth managers. After all, 29% of consumers will leave an app if it feels too slow. And the pain of waiting for money can be even more painful.
As well as satisfying clients, instant top-ups are a good way to increase AUM for Wealth Managers.
5. Automated trade execution
The likes of Revolut already offer automated trade execution for retail investors. Yet, despite this, we’ve seen relatively few wealth managers offer their clients the same.
Research by Bloomberg found automated trade executions lead to more favourable results than manual transactions. In Europe, during medium volatility, they increase profitability by 2.8 basis points on average. For a firm turning over a conservative £500,000 of trades each day, this adds an extra £36,000 to the coffers at the end of the year. As you’d expect, in periods of high volatility, it ramps up even further to 5.5 basis points adding an extra £71,500 annually.
Offering this to clients could help to create a virtuous cycle of positive effects. It could remove stress, increase AUM and strengthen loyalty, all while adding zero to the manager’s workload. Combined with hyper-personalised suggestions could be especially powerful.
A trove of tech opportunities await
On paper, Gen-Zs and traditional wealth managers are a match made in heaven. Fascinated with investing, keen to grow their incomes and demanding hyper-personalised expertise would have been a dream generation for firms just a few decades ago. But the modern world isn’t on paper, it’s digital. And that’s the problem. After the 2008 crisis, wealth managers slowed their investment in innovation dramatically, exactly at the dawn of the smart phone. Today there’s a burning gap in the market.
Interested to discover more?
As experts in wealth tech, we’ve identified these five areas as “must-haves” for managers today. But there are many more “should-haves”, “could-haves” and “that-would-be-good-haves” just waiting to be explored.
For a hassle-free consultation with no strings attached, we’re just a call or click away.
