The record for the biggest player transfer in soccer history took place in 2017, when Barcelona’s Neymar transferred to Paris Saint-Germain. The deal was worth a staggering €222MM (approximately $240MM today). Paris Saint-Germain followed this with another pricey transfer when they lured Kylian Mbappe away from Monaco. Although multimillion-dollar team transfers were not new, these two deals shook up the soccer world and set the stage for more high-stakes trades over the past several years.A different type of transfer — that of generational wealth from baby boomers to their millennial and Gen Z heirs — is set to significantly impact financial services over the coming decades. Dubbed the “Great Wealth Transfer,” an anticipated $84T is expected to pass down over the next 20 years, presenting unique opportunities for community financial institutions (CFIs) to position themselves to meet the needs of these future customers. One way to distinguish your institutions is by implementing a digital wealth management solution. This can be a key differentiator for CFIs as they seek to attract and retain customers and remain competitive in a changing financial landscape. The Changing Face of Wealth ManagementHistorically managed separately from everyday banking, wealth management was typically offered face-to-face and was predominantly geared toward high-net-worth clients. However, rapid advancements in technology, changing customer expectations and demographics, and shifting global economic dynamics have resulted in the wealth management space evolving significantly in recent times. Many fintechs have seized the opportunities presented by these factors and have strived to make wealth management more personalized, user-friendly, and accessible to a broader audience. This has resulted in the rise of several digital-first wealth management platforms and robo-advisors (digital, automated, algorithm-based financial advice and investment applications).
Digital Wealth Management for Evolving Customer PreferencesYounger generations tend to be digital-first, tech savvy, and often highly aware of their financial needs. They expect integrated, personalized, and tech-driven financial services over which they have choice and control. Given the expected transfer of wealth to these generations, there is an opportunity for CFIs to offer modernized digital wealth management solutions to make wealth management accessible, cost-effective, efficient, and attractive to this future customer base.Several CFIs have already begun adopting digital wealth management solutions and financial advice and planning services to meet the needs of younger generations. For example:
Digital Wealth Management for Evolving Customer PreferencesYounger generations tend to be digital-first, tech savvy, and often highly aware of their financial needs. They expect integrated, personalized, and tech-driven financial services over which they have choice and control. Given the expected transfer of wealth to these generations, there is an opportunity for CFIs to offer modernized digital wealth management solutions to make wealth management accessible, cost-effective, efficient, and attractive to this future customer base.Several CFIs have already begun adopting digital wealth management solutions and financial advice and planning services to meet the needs of younger generations. For example:
- Oklahoma-based First Fidelity Bank launched a comprehensive digital wealth management solution in collaboration with a fintech. The fintech provides a turnkey digital wealth management solution incorporating robo-advice and commission-free trading for a range of assets. This solution was fully integrated with the CFI’s existing digital banking platform, allowing it to go live quickly and easily.
- Hawaii-based Central Pacific Bank offers a digital-first investment experience, combining automated financial advice with human oversight. This hybrid approach allows clients to receive the benefits of robo-advisory technology while still having access to expert guidance when needed.
- Community America Credit Union in Kansas recently integrated a robo-advisory tool into its existing banking platform. The automated digital tool professionally manages customers’ investments based on their risk tolerance and time horizon. It also offers a flexible, cost-effective option for new customers wanting to invest.
Benefits of Offering Digital Wealth Management SolutionsBy integrating wealth management into their existing banking services through a seamless digital experience, CFIs can meet the needs of younger generations — and strengthen relationships with existing customers. Digital wealth management services can help CFIs to:
- Enhance engagement. One effective method of using digital wealth management to gain engagement is by creating a user-friendly digital platform that’s integrated within an institution’s existing digital banking platform. The connection between one’s wealth management and digital banking systems helps you offer algorithm-driven personalized financial advice, financial education, and other product recommendations suited to a customer’s needs. These platforms can create highly personalized investment strategies tailored to individual needs, goals, circumstances, and risk appetites. What’s more, CFIs can leverage their strengths in relationship banking by offering a hybrid model combining automation with human touchpoints to build more trust and engagement.
- Appeal to younger generations. An easy-to-use, on-demand, and efficient digital wealth management platform can appeal to the expectations and needs of younger generations. These platforms should offer a transparent overview of customers’ finances and the costs associated with the services as well as provide customers with more choice and control over their finances and investments.
- Provide services to a broader customer base. Robo-advisors and automated investment platforms can significantly lower operating costs, which means CFIs can offer competitive rates and lower minimum investment amounts. This should enable institutions to appeal to a broader customer base. As a result, wealth management and financial advice becomes more accessible and attractive, enabling CFIs to provide these services to more customers within their communities.
- Create diversified revenue streams. By expanding into wealth management and offering investment products, financial planning, and advisory services, CFIs can tap into new, recurring revenue streams. Subscription-based models are also gaining traction. These provide simplicity and transparency and can make wealth management more appealing. They can also be tailored to clients at different stages of wealth-building, providing institutions with a steady stream of noninterest income.
The Great Wealth Transfer presents a fantastic opportunity for growth. By embracing digital wealth management solutions like robo-advisors, CFIs can attract younger clients, reduce costs, position themselves as trusted partners in their customers’ financial journeys, and set themselves up for long-term success.
