The oncoming $84 trillion wealth transfer: Digital solutions for wealth management firms

The greatest transfer of generational wealth in history is underway. American families have gathered a staggering $140 trillion in wealth as of 2022, according to the NY Times, and $16 trillion of it will pass down over the next decade from Baby Boomers to Generation X, Millennial, and Gen Z heirs—a total of $84 trillion by 2045. Even accounting for inflation, the total accumulated family wealth is more than triple what families had accumulated by 1989. The world has never experienced an inheritance of this size, and while it is certainly a boom for the wealth management industry that will manage it, this is an opportunity that also comes with significant challenges.

New generations, new expectations

With the largest generational wealth transfer in history on the horizon, the wealth management industry must step up and adapt to the changing needs of younger generations.

Modern, simple, and intuitive wealth management experiences

Gen X, Millennials, and especially Gen Z have different investment priorities from the prior generations, so they’ll need to buy different kinds of investment products. For these younger generations, the digital experience is paramount. Their interactions with wealth management advisors and the firms they work for must be modern, simple, and intuitive. They value efficiency and scalability—the firms they choose will be able to handle many different tasks accurately and quickly. In part, this means that their interactions should be informative. Customers and advisors will want to know, “What is my “next best action (NBA),” and how does this information help me understand what is happening to my investments?”

Reliable management applications for an influx of new customers

Not only will the type of investments and experiences wealth management firms provide need to change, but the number of potential customers and the volume of business will increase. Baby Boomers typically have multiple heirs, and those heirs will need to invest their newly inherited wealth into multiple new products. The workload will significantly increase, and demand for growth investment products will expand—after all, that $84 trillion held by Baby Boomers and the Silent Generation is primarily held in conservative investments. Hiring enough wealth managers to accommodate all this new business at the current rate of productivity is not likely an option.

Digital-first, user-friendly wealth management applications 

Inheriting generations also have different expectations about interactions. They want them to be digital and online-focused, unlike prior generations’ desire to regularly meet with financial advisors in person. In fact, younger heirs may want to interact mostly online. After all, they’re increasingly comfortable making major purchases, such as a new car, completely online, with little to no human interaction. Why should an investment product be any different?  

That’s not to say you shouldn’t create opportunities for in-person interactions. It’s important to create accessible pathways to connect with advisors for the bigger conversations. For example, they’ll likely look to digital applications to understand if their investments are going well or if there might be unique opportunities that could benefit them. But, when it comes to moving significant sums of money, it’s important that they can connect with a person to have a conversation about possible scenarios. Ensuring a good digital experience to get there will be key.  

Building a digital experience strategy for your financial services applications

Wealth management companies need to create a strategy now and begin planning to meet this generational wealth transfer challenge. Here’s how:

1. Utilize customer research to understand what heirs expect from their wealth management experiences 

Of course, you shouldn’t blindly take our word that this is what your customers want. It’s possible you serve a specialized subset of Generation X that highly values personal relationships with their advisors formed over formal and informal meetings. How do you know for sure?

You ask them by conducting voice of the customer research, which needs to be an ongoing activity, not a one-off event. Customer desires and needs change rapidly, and the pace of change is accelerating. You’ll need to stay on top of these evolving trends to remain competitive. 

2. Determine your high-level strategy and make a plan

First, you’ll need to map out your goals and determine your strategy. Do you want to focus on winning new clients? Or focus on the ones you already have? 

From there, you’ll make your plan forward. This plan needs to be based not on gut feelings, but on clear, rigorous, ongoing research data about what your customer needs. It’s a safe bet to say that, in our increasingly digital world, the solutions you need for customers (and your employees) will have a strong digital component, if not 100% digital, from the get-go.

3. Create a dynamic backlog of improvements to be made based on feedback from heirs

This is a living list that grows and changes over time. To keep the list fresh, establish listening posts, where you periodically check in to see what customers’ experiences are like. This process will inform heuristics, i.e., the trial-and-error process you’ll use to discover what you’re not doing today that you should be doing to solve customer problems.

4. Establish a process for designing and developing your wealth management solutions 

You’ll need to employ DesignOps, a concept we’ve written about in detail here. In a nutshell, though, DesignOps is a framework of processes and measures that enables designers to focus their attention on designing and researching to support scalable solutions that meet real customer needs. You’ll also need a process to optimize the work of your developers—almost certainly DevOps or a similar Agile framework—and a process to manage how these two teams will work together.

Basically, even though you’re not a product development team—you’re a financial management firm—you’ll need to think like a product team. We’ve written about how to make that work as well.

5. Determine what design and development resources you need to reach your goals 

Do you have internal teams of developers and designers? If so, will these resources be sufficient to accomplish your goals? If not, how will you get them: hiring or working with a third-party firm? Then, you need to decide whether you have enough internal development to do the job outside the firm or hire development resources—what will you need to achieve your goals?

6. Don’t forget about the advisor experience 

Even in a mostly digital world, your employees are still vital to ensuring customers are satisfied and happy. Their experience will have a huge bearing on your customers’ experience, so invest not just in research on the voice of the customer, but also in the voice of the employee. Where are there opportunities to streamline their workflows? Which processes don’t work very well, and what are their biggest pain points? The same process you use for customers will likely apply to ensure that advisors (your employees) have everything they need to do their jobs well.

7. Consider ethical AI opportunities that are compliant

AI can increase efficiency, and generative AI, in particular, has a lot of potential to improve efficiency and provide a scalable online experience that feels a lot like working with a human being. But AI may not be the best solution, and shoehorning AI into a solution that doesn’t need it increases complexity and expense without providing commensurate value. Where applicable, you need to take care to install appropriate guardrails so that generative AI doesn’t provide wrong information or unethical advice and is compliant. You must employ strong change management to engage employees and gain their buy-in. 

The Great Wealth Transfer is coming. Is your organization ready?

The Great Wealth Transfer is an opportunity and a challenge for wealth management firms, especially given the different expectations of the younger generations who will inherit these staggering sums of wealth. Firms must start strategizing and planning now to ensure their businesses are prepared for these digitally-inclined, growth-minded clients. Those who do will thrive.

Our team of experts can help you improve your financial services applications to ensure you’re ready to provide best-in-class user experiences. Let’s chat.