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Gen X predicted to choose a Netflix style of wealth management

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Hyper-personalization is the future for Gen X across all walks of life, including their finances, with young investors expecting robust digital solutions and a Netflix-inspired method to managing their wealth. 

Ever since Netflix and Amazon perfected the tailored recommendation and Spotify mastered the presentation of behavioural data in their yearly Spotify Wrapped, hyper-personalization has taken the world by storm, with the finance sector being no exception. A McKinsey report predicts that by 2030, 80% of new wealth management clients will prefer to access advice via a Netflix-style model that is data-driven and hyper-personalized. Right now, the foundation for such a digital transformation is already being laid.

Young investors demand digital solutions

While the COVID-19 forced financial companies to adopt digital alternatives whether they wanted to or not, changing demographics means that digital solutions have never been in greater demand. Not only is the new generation of young investors tech-savvy, often they even prefer digital solutions: EY reports that globally, 51% of clients plan to increase their usage of digital wealth management tools in the future, with the number rocketing to 78% amongst millennials.

Clients have no problems sharing data 

However, the key to achieving a data-driven digital model is to first have a reliable source of data. If clients are not willing or able to share their data with their wealth managers, even having the best digital customer journey would not amount to much. Luckily, statistics show that clients are willing to share data: perhaps even more than expected, with EY showing that 78% of clients are more willing to share personal data with their wealth manager than with their own doctors. This is, however, contingent upon the clients receiving more relevant experiences and services than before.

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Data source: EY 

The current state of personalization 

Clients are both demanding digital solutions and are willing to provide the necessary data to achieve a personalized form of wealth management. The fact of the matter is that right now, 40% of HNWI are not satisfied with their wealth managers on the account of there being not enough personalized recommendations. Currently, we see personalization being conducted through AI-based portfolio optimizers and robo-advisors. Clients are often presented with personal questions so as to create a tailored portfolio specific to their answers. This can be as specific or as general as clients want: in the case of Privé Technologies’ AI-based portfolio optimiser, clients can even decide which niche themes they’d like to include in their portfolio, decide how ESG-focused they’d like their portfolio to be and even customize the percentage contribution of each individual fund.

Hyper-personalization in the future 

AI-based optimisers and robo-advisors are still in their beginning stages, with new innovations happening every day. In the future, we will see portfolios being able to be customized down to the wire and with far more data points than before. Wealth advisors will also be able to use the data gathered to offer better and more relevant products to their clients outside of portfolio management. They will be able to create predictive and behavioural models to anticipate future decisions, offering clients the right products just when they need them.

A June 2019 Temenos and Forbes Insights survey found that 82% of wealth management executives believe that those who increase product personalization will succeed, but with so many firms planning personalization strategies, the work to create a hyper-personalized wealth management model must start now.

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