Intergenerational Wealth Management: Five Initiatives for 2018

In a previous blog post, Intergenerational Wealth Management: What’s the Opportunity? I  identified the significant opportunity that financial services firms face with the aging of the baby-boomer generation.

To reiterate, over the next 30 years, an estimated $30 trillion in wealth will transfer from baby boomers to Generation X and millennials. And the challenge for financial services firms is that an estimated two-thirds of all beneficiaries choose to move the assets they’ve inherited to another institution—which means the original firm loses out on the opportunity to manage these assets across multiple generations of clients.

If you recall, last time I explained why financial advisors and firms are failing to address the opportunity. This time around, I explain what firms should do to get it right—basically, how to succeed at intergenerational wealth management.

I’ve broken it down into five tracks that financial services firms should focus on in 2018, by undertaking initiatives to address the specific challenges of intergenerational wealth management. Each of these tracks requires effective use of new technologies in redesigned processes; we recommend implementing them in a phased approach, which provides benefits at each step and controls risk.

The tracks, listed In the order in which you should tackle them, are as follows:

  1. Settlement and distribution
  2. Relationship management
  3. Portfolio management.
  4. Onboarding
  5. Servicing

The following figure shows where each of these tracks fits in the general client lifecycle:

Within each of these five tracks, here are the initiatives you should consider undertaking to improve your firm's capabilities for intergenerational wealth management.

1. Settlement and Distribution

Going forward, focus on the experience of all parties involved and on improving the efficiency of the settlement and distribution process. The primary issues are complexity and inefficiency. The complexity results from the need to track and manage tasks that span many different operating groups within a financial services organization (e.g. Brokerage, Retail, Real Estate, etc.); the general inefficiencies are the result of manual or paper-based processes. An effective solution is to use a team of “expeditors” to coordinate activities and transfer assets.

For your technology strategy, we recommend the following:

  • Leverage operational efficiency technologies, including workflow to track tasks, monitor SLAs, and provide visibility. In the near term, use a simple work management solution (e.g. Microsoft SharePoint). But a serious initiative requires the more robust capabilities of case management technologies (which will also be used for the later Onboarding and Servicing processes of Initiatives 4 and 5, below).
  • Use digital file upload and a virtual document library.
  • Remediate and upgrade the participating systems and processes as needed. You may have to upgrade your ECM system, for example.
  • In later phases, integrate with developed Relationship Management and Portfolio Management (see Initiatives 2 and 3).
2. Relationship Management

Almost all intergenerational wealth management activities require digital collaboration and self-service capabilities, but these capabilities are most critical for relationship management.

To meet the particular requirements of intergenerational relationship management, we recommend that you develop relationship management use cases to drive the implementation of engagement technologies. Focus on the “family” as the primary client, and engage early and often. Sponsor events that involve family members. Offer programs for different age groups, etc.

For the technology to support engagement with this broader conception of the client:

  • Use engagement technologies and (when you’re ready) integrated contact management.
  • Use video conference, chat, Skype.
  • Practice technology-enabled meetings with members of the younger generation (tablet, co-browsing capabilities).
  • Implement the capability for client asset movement on the client portal.
3. Portfolio Management

Intergenerational portfolio management is about providing value-add services, with a focus on the family, as opposed to the individual. Examples include aggregating held-away assets, harvesting tax losses, rebalancing, recommending model portfolios, providing robo-offerings, and providing a dashboard view of alerts and opportunities.

Firms can help their clients’ children with early financial planning decisions around events such as college savings, home buying, and new births; assist clients in setting up 529 plans; ensuring adequacy of life insurance coverage; and in creating lifetime gifting plans.

For the technology to support such portfolio management activities:

  • Use the engagement tools deployed for relationship management (Initiative 2).
  • But add a dashboard, allowing participants to access key performance metrics, aggregate accounts, and see their complete financial picture.
4. Onboarding

Like “typical” onboarding of new accounts, onboarding for intergenerational wealth management requires activities and coordination of multiple areas, such as Front Office, New Accounts Team, Money Management, and Funding. But it differs in that it focuses on the “family” as the primary client, and it should also address efficiency challenges (e.g. previously concentrated assets now distributed among multiple new clients, inherited assets too small to be managed profitably with existing processes).

For the technology to support this new approach to onboarding:

  • Use “typical” onboarding efficiency technologies and processes for onboarding new accounts, but digitize and automate as needed to address intergenerational requirements (i.e. you’ll probably need to update and enhance what you’re doing today).
  • “Typical” technologies for efficient onboarding of new accounts include multi-channel ingestion and automation, e-forms, e-signature, process management, and repository management.
  • A best practice is to use the case management tool deployed for Settlement and Distribution (Initiative 1, above).
  • Use the engagement and portfolio management technologies and processes from Intergenerational Relationship Management and Portfolio Management (Initiatives 2 and 3 above)
5. Servicing

Like intergenerational Onboarding, intergenerational Servicing requires activities and coordination of multiple areas, with some differences: Front Office, but also Tax, Money Management, Court Accounting, Overdrafts, Bill Pay, and Account Maintenance. And as with Onboarding, servicing should focus on the family and address the entailed efficiency challenges.

At a high level, your technology strategy is the same as for intergenerational Onboarding, implemented this time across the units involved in the servicing processes:

  • Use “typical” servicing efficiency technologies and processes, but digitize and automate as needed to address your inter-generational requirements (i.e. you’ll probably need to update and enhance what you’re doing today)
  • “Typical” efficiency servicing technologies include multi-channel ingestion and automation, e-forms, e-signature, process management, and repository management
  • A best practice is to use the case management tool deployed for Settlement and Distribution (#1 above)
  • Use engagement and portfolio management technologies and processes from Inter-generational Relationship Management and Portfolio Management (#2 and #3 above)

And what about vendors and products to address the various technology pieces? There are many relevant tools, including Truelytics, ElysysWealth, Fidsafe, Navatar, Wealthfront, Betterment, and of course Salesforce. Not to mention the ECM and process management solutions. But today none of them provide a productized comprehensive solution by themselves or using partnerships.

Next Steps

How should you get started? For most financial services firms trying to develop intergenerational wealth management, we recommend the following next steps:

  • Identify the gaps in your current approach for intergenerational wealth management by working with IT, Operations, and leaders of the relevant business units.
  • Build out the vision and the plan for addressing the five key areas identified above—i.e. settlement and distribution, relationship management, portfolio management, onboarding, and servicing.
  • Define the business case for moving forward.
  • Identify the resources required to deliver the future state
  • Recommend the technologies that can be leveraged throughout the process.

Finally, if you’d like some help taking any of these steps, Doculabs offers the expertise to get you started and to guide you along the path toward that future state—from the initial requirements definition and technology selection through the change management to put the new processes in place. And if you’d like to stay informed on our thinking on this and related topics, you can sign up here for our newsletter.

Rich Medina
Rich Medina
I’m a Principal Consultant and co-founder of Doculabs, and the resident expert in using ECM for information lifecycle management.