Creating Legacies With Trust

In recent years, the population of high‐net‐worth individuals (HNWIs) – individuals with liquid assets of at least 1 million USD – has grown steadily, averaging 6 per cent growth per year between 2014 and 2020, and reaching 22.5 million HNWIs globally by late 2021.

In the USA alone, this equates to 86 USD trillion in total financial wealth – yet another record statistic. A compelling thought is that 68 trillion USD of this wealth will pass between generations over the next two decades.

While traditional sectors like finance and investments and manufacturing continue to account for the largest portion of billionaires – 393 and 337 estimated billionaires per sector, respectively – the tech sector is quickly catching up, with the third most billionaires globally.

As of 2022, there were an estimated 332 billionaires in the tech sector, with a total net worth of 2.1 trillion USD. And while the number of HNWIs continues to evolve, so too do the systems and the processes that support them.

On the surface, this significant increase in HNWIs appears like a wealth of opportunity for financial advisors, but this has not been the case. As wealth flows through family lines, individual values and priorities change, and many new HNWIs explore alternate management options.

In fact, recent data indicates that 80 per cent or more of HNWIs will search for a new financial advisor after inheriting their parents’ wealth.

This is particularly relevant in the tech sector, where HNWIs increasingly look to family offices and digital‐based services rather than traditional wealth managers. According to Capgemini, 73 per cent of tech HNWIs switched their primary wealth management firm after crossing the 1 million USD threshold, citing digital immaturity, poor customer experience, and a lacking product portfolio.

A financial advisor that wants to attract this new wealth and the next generation of heirs must have the full gamut that today’s potential clients are looking for, along with an understanding of the social and economic contexts that have shaped the upcoming generation’s investment priorities.

One‐stop shop, but not one size fits all

Legacy wealth managers of the last century understood the needs of the industrial era’s new wealth, but are failing to keep pace as next‐generation heirs take the reins. Industrial‐era wealth demanded discretion, sincerity and commitment, while today’s wealth values hyper‐personalised, omni-channel connection.

They seek a one‐stop‐shop model that offers 24/7 digital touch points with trusted, personalised advisory. This new model understands context and the need for real‐time support, offering personal connection and trusted advice.

The modern investor

The next generation is tech savvy, imprinted by technology and the financial crisis to seek greater control over their finances. Embracing wealth management with a new lens and expectations, modern investors crave bespoke solutions, rooted in data to mitigate risk. In many ways, the same technology that shaped this generation is set to change the delivery of wealth management advice.

Robo‐advisors, a hallmark of modern fintech, have grown immensely in popularity, providing data‐based solutions at a low cost. Yet, despite the potential for innovation and disruption, robo‐advisors lack human connection. The modern advisor must be the full package, bridging the structured world of wealth management with human understanding, passion and nuance.

Compassionate understanding

This comes to life as advisors take into consideration the social fabric of the next generation of HNWIs. In addition to family wealth, these millennial and Gen Z heirs have inherited a different world than that of their parents and are more socially conscious investors as a result.

Raised amid a climate crisis and rapid developments in digitisation, these potential clients’ investment priorities are not the same as those of previous generations. If they want to keep the family’s business within their portfolio, advisors must adapt their offerings to align with new priorities, such as climate‐centric investments, the advisor’s carbon footprint, philanthropy, and digital asset management.

Comprehensive approach

Modern wealth managers must assess their client’s financial position in its entirety within the context of their individual goals, values and interests. This comprehensive yet fluid approach, coupled with a depth of youth and experience and access to expert resources, allows advisors to provide tailored solutions.

When clients find an advisor with shared values and a clear understanding of their objective, both parties benefit by nurturing long‐lasting relationships that advance their collective ambitions.

This article was originally published by the Bahamas Financial Services Board,

The author of this text, Paul Winder, has a career that spans over 30 years in the financial services sector with emphasis on creating products and services in the international tax treaty and estate planning arena. Paul is Head of Fiduciary Products & Markets at Deltec Bank & Trust and CEO of Deltec Fund Services,