Skip navigation
money telescope Jorgenmac/iStock/Thinkstock

Wealth Management Firms Are Missing the Target on Next-Wave Client Segments

Family offices tend to fare better.

Wealth management firms are missing out on capturing a new emerging demographic of high-net-worth individuals, according to Capgemini’s 2022 World Wealth Report. Women, millennials and HNW newcomers are all flagged as emerging, high-potential market segments, yet only 27% of responding firms said they actively pursue these prospects. Instead, family offices are capturing the market share, as they’re better able to “connect emotionally with clients and flexibly cater to their complex demands.”

Furthermore, Capgemini’s study shows that the global HNW population overall expanded by 7.8% in 2021, with wealth growing by 8%. It cites unprecedented government stimulus packages, low-interest-rate environments, increased liquidity, stock market gains and widespread COVID-19 vaccinations as contributing factors for the growth. However, that growth trend may not continue in 2022, as everyone from Elon Musk to Goldman Sachs has been issuing strong recession warnings this week. The study acknowledges the same, finding that stock market corrections are accelerating and that global HNW wealth has already declined by 4% as of the end of April 2022.

Emerging Client Segments

To capture emerging client segments, firms must rethink their engagement strategies, according to the study. As mentioned, these HNW individuals are overlooking wealth management firms, instead turning to smaller family offices. The study revealed that 63% of HNW individuals prefer family offices over large banks/wealth firms, with roughly half citing they prefer the one-stop-shop convenience and personalized services, as well as family offices’ reduced service costs.

The survey cites a lack of segment-specific marketing as one of the biggest drivers of wealth management firms not connecting with next-wave client segments. A lack of a well-prepared advisor workforce is also part of the problem. For example, though not that much different from their male counterparts, HNW women seek additional value-added services around retirement, legal support and tax consultation. Female HNW clients also tend to want to be more actively involved. Additionally, the study revealed that 30% of advisors say they don’t understand LGBTQ+ client needs, including financial and legal complexities during pivotal life events.

Millennials and next-gen HNW clients also require nuanced services. Tech-savvy and always connected, they prefer minimal guidance and robo advisors. They also switch advisors frequently, citing high fees, lack of transparency and slow service. “Building the right channel, fee and experience strategy will be vital to capturing the next generation of HNW clients,” says Harsh Kumar, head of U.S. Citi Alliance, Citi Global Wealth Management.

The Family Office Advantage

Not being subject to the same regulations as wealth management firms and private banks has also helped family offices gain market share traction. By acting as a trusted partner rather than a provider, family offices provide a boutique approach that’s particularly desired by the new emerging demographic of HNW individuals—including investment advice to startups and insights on venture capital and cryptocurrencies (something that some wealth firms and estate planners are still lacking).

Most importantly, HNW individuals place a high value on the emotional connection provided by family offices, according to the study. In fact, HNW individuals say relationships, service and value with other industry players such as legal advisors and tax planners are slightly better than those with wealth management firms, leaving them behind in the dust.

“The role of family office surpasses strategic allocation,” says Edouard Herbo, co-founder of Keepers, a family office. Herbo finds that they bring an intimacy to clients, as opposed to the strictly transactional experience with wealth management firms. Clients also prefer the advice-based fees as opposed to the AUM-based fee model used by traditional banking institutions.

To become more equal players, wealth management firms need to improve the client experience. Wealth management firms’ lack of digital expertise or a diverse product portfolio continues to be a driving cause of HNW individuals’ dissatisfaction with their firms. Of those HNW respondents surveyed who plan to shuffle providers, 43% said they may seek out a wealthtech firm. The pandemic has also caused a shift toward HNW individuals becoming more actively involved in their own investing, while still valuing human connection, increasing the demand for a more hybrid model of personalized services and digitization.

TAGS: Industry
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.