31 May 2017
Industry News


A number of trends are emerging in private wealth management (PWM), driven by profound changes in the demographics and attitudes of wealthy Australians.

Arguably the biggest shift is the changing face of wealth in Australia. It is no longer concentrated in the hands of elderly and middle-aged, white Anglo-Saxon men. Australia’s future rich will include people of all ages and nationalities, from disparate backgrounds. Wealth will also be more equally spread across the sexes, as more and more women become successful and powerful.

This trend will only accelerate as the Baby Boomers retire and pass on wealth, leaving their estate to their partners, children, grandchildren and beloved charities and causes. Furthermore, as the nation transitions from mining investment-led growth to broader-based growth, with an emphasis on innovation and start-ups, the commonly held hope is that an ideas boom will create jobs, stimulate economic activity and spawn a new generation of entrepreneurs and academics with a remarkably new perspective on what it means to be wealthy. Throughout Australia and across the broad range of demographic groups, there is already evidence of that occurring today.

To stay relevant to their clients then, advisers must think about to whom the money is flowing – not merely where the money is flowing from. If it is established money flowing to younger people, both parties will need strategic advice and coaching on structuring and tax, investing, estate planning and philanthropy. But the approach and level of service will vary greatly from the old money to the new.

As wealth becomes a less taboo subject, given the burden it can place on the beneficiaries, families are seeking help with these delicate conversations. The key beneficiaries of the imminent intergenerational wealth transfer, including women and millennials, will not want the same type of service and advice as their husbands, fathers and grandfathers. Similarly, the next generation of self-made entrepreneurs and executives will have different values and priorities. It will not all be about performance, performance, performance.

Advisers will need to develop a different proposition for the future rich, in order to win their trust and loyalty, and to stay relevant during this transition.

Digital delivery

The channels through which advice is delivered and what coming generations will want in this regard is another mismatch – more obvious and perhaps easier to address. People of all ages, especially ‘Gen Ys’ and younger, conduct a significant part of their lives online. They bank online, they shop online, they learn online, they socialise online. And they will certainly expect to be able to receive a meaningful amount of advice online.

While there will always be demand for personal advice, validation, coaching and highly customised solutions, the delivery of this advice will increasingly be through digital channels. This will enable clients and advisers to do business anytime, and from anywhere in the world. To keep up, advisers will need to experiment with communication methods such as webinars, videoconferencing and audio. Their marketing strategies may include targeted LinkedIn and Google AdWords campaigns, search engine optimisation and blogs.

Identifying the right technology solutions and integrating them into a PWM firm is arguably the easy part, given the abundance of inexpensive, user-friendly, cloud-based software designed to help drive organisational change and efficiency. However, companies with complex legacy systems may find this challenging, especially if they have already heavily invested in proprietary solutions.

Either way, PWM firms will need to overcome their fear and apathy regarding technology and commit to embracing change.

Once they do, they’ll still face the more complex issue of understanding a client’s values, goals and objectives, and what motivates and drives them.

As previously mentioned, it’s rarely wealth and status alone.

This shift is radical for many traditional PWM advisers, who have spent most of their careers looking after Baby boomers, a generation heavily focused on accumulating wealth and possessions.

The emerging generation of rich Australians are more mindful of social responsibility. Many feel they have an obligation and responsibility to give back to their local and global communities, which means caring for the environment and others. Some will already have a cause that is close to their heart.

In our modern world, they believe they are empowered to do something about it. The concept of investing with “smart heart”, not just head, is something advisers will need to understand in order to be relevant to the new wealthy client.

For the past 20 years, the value proposition of a typical adviser has mostly been built on delivering investment performance, but an increasing number of clients will be concerned about the social and environmental impact of their financial decisions as well. Investment returns will still be important but advisers will need to satisfy all three areas and deliver a ‘triple bottom line’ result.

This will require them to know their clients on a whole different level in order to identify, build and deliver creative investment strategies and solutions that are not aligned only with a risk profile but also with the client’s purpose.

The importance of this trend will become more apparent as governments continue to pull back on the aid and fiscal support they allocate to charitable causes and the non-profit sector. Greater responsibility will fall on the private sector.

There are implications for PWM firms beyond client acquisition and retention. In order for them to attract the best talent, they may also need to adjust their employment terms to encourage staff to participate actively in giving programs and volunteer work with charities and social enterprises.

Emotional intelligence: Bring it on

There is no question that the typical PWM client of the future will look vastly different to how they look today. As a result, they will be looking for different qualities in an adviser.

In addition to technical knowledge, advisers will need strong interpersonal skills and a higher degree of emotional intelligence. While IQ-related tasks may be in danger of automation, there is no substitute for EQ. A personal relationship cannot be replicated by technology.

Advisers will be measured by their ability to guide conversations, manage conflict and educate. Therefore, advisers need to bring more EQ to the table to reach and service the future rich successfully.


Read more at professionalplanner.com.au