Smart prospecting: how data and technology transform wealth management marketing

Introduction

The current landscape of wealth management is dramatically changing due to three key factors: the aftereffects of the pandemicthe pandemic, the growth of the mass affluent market segment and, the HENRYs (high earners, not rich yet) who will soon be driving a coming huge generational transfer of wealth. Many U.S. consumers who do not have money now will have significant assets in the near future.

This white paper discusses how these market changes are driving the need for wealth management companies to adopt a holistic data-driven approach to prospecting. Further, we will present how firms will benefit from a personalized, omnichannel strategy, reaching prospects and clients at the right time, place, and frequency to build trusted relationships.

Embracing the evolution of wealth management to capture the next generation of investors.

The work of wealth management has been dramatically and forever altered since the pandemic. Investor attitudes, behaviors, and expectations have been reshaped by monetary policy changes and the widespread accessibility of AI and other technologies. Additionally, the industry sees two new market segments that are gaining ground: the mass affluent segment and the upcoming transfer of generational wealth.

The mass affluent. According to the UBS Global Wealth Report 2023, the mass affluent segment now represents 26% of the U.S. population, and has between $100,000 and $1 million liquid assets and an annual household income above $75,000. A smaller, but significant portion of this segment are HENRYs, earning over $100,000 annually but with a net worth under $1 million. Currently, HENRYs are spending most of their income on living expenses. In the future, due to their careers, education, and other underlying factors, they are expected to experience a rapid and significant velocity of asset growth within a relatively short timeframe.

The great wealth transfer. According to a report by Cerulli, an asset management consulting firm, an estimated $84.4 trillion in wealth will be transferred by 2045, with $72.6 trillion to be passed on to heirs. A whole new generation of consumers, possibly unfamiliar with wealth management, will need to find and work with an advisor to manage and protect their inherited assets.

In addition to the growing mass affluent market and coming generational wealth transfer, consumer behavior in general is changing, along with other industry dynamics:

• Shifting investor behavior: Widespread accessibility of brokerage platforms such as E*TRADE and Robinhood has led to a shift in where and how investors wish to manage their wealth. Traditional wealth management firms now must compete with the ease of accessibility and improved visibility into investment performance these digitally native firms offer. An EY report indicates Millennials are more than twice as likely (73%) than Boomers (29%) to switch between providers, to move assets between firms or to begin working with new wealth managers. They are also far more likely (49%) than the global average (33%) to have sought independent professional advice in response to external shocks.
• Digital transformation: Younger generations entering their wealth accumulation years often prefer digital and self-service solutions for asset management. Technological and operational advancements will be essential to meet the expectations of retail investors, who are now accustomed to seamless customer experiences and improved accessibility.
• Addressing the talent gap: The current advisor workforce is retiring soon, underscoring the urgent need for new talent that can get up to speed quickly. A Cerulli report projects that 36% of the industry's workforce will retire within the next decade, impacting nearly 40% of advisory assets.

Market changes are driving a new approach to lead generation.

Historically, prospecting for new wealth management clients relied on personal relationships, the one-on-one marketing of “I know a guy.” While today’s corporate lead generation programs have moved beyond this, prospecting still remains a one-dimensional activity. Companies buy or generate an email list, host a webinar or podcast, and then have a call center team warm up leads for further engagement. At some point, prospective clients are assigned to a financial advisor or private banker to continue building the relationship to nurture.

None of these activities are personalized to the prospective client. Beyond broad demographic parameters, everyone is treated relatively the same. Yet today, a whole new universe of data is available to wealth management marketers.

By utilizing data-driven technology, companies can quickly and accurately find leads to create a more personalized, targeted prospecting approach. Digital solutions based on AI and machine learning allow wealth management firms to see and address client needs in a whole new way. Marketers can meet each consumer in their channel of choice and provide a financial product that addresses their needs in that moment such as mortgage lending, debt consolidation, or asset structure for a retirement account.

Advancements in cloud infrastructure, customer experience platforms, machine learning, and AI are transforming the business of wealth management. Utilizing technology innovation is paramount for wealth management firms to capture the next generation of investors and provide more personalized, efficient, and effective services to their clients.

The adoption of these innovative technologies enables advisors to deliver hyper-personalized services at scale by establishing a deeper understanding of their clients’ needs and preferences. By leveraging data and technology, wealth management firms can unlock the full potential of the mass affluent and HENRY segments, while also preparing for the upcoming wealth transfer and the evolving needs of a new generation of investors.

Leveraging data-driven technology to find HENRYs.

Advanced data technology platforms now allow financial institutions to monitor, detect, and signal client life changes based on life stage, online and offline behavior, and account transactions. This process, known as intelligent prospecting, aggregates data from various sources and identifies patterns and trends in financial behavior that indicate a customer's progression towards the mass affluent category.

Rapid asset growth is traditionally associated with major life events such as business sales, promotions, and inheritances. By analyzing demographic data, transaction histories, and market trends, wealth management companies can pinpoint segments with the highest propensity for asset growth. With real-time monitoring, firms can continuously track transactions and financial activities to update predictions and signal changes promptly.

Using a connected outreach ecosystem: the power of precision.

Once a mass affluent or HENRY prospect has been uncovered, wealth management firms can leverage their connected ecosystem to deliver hyper-personalized, client-centric advice at scale. A customized strategy could be developed based on the underlying circumstances of each individual or household. Tailored recommendations and communications that resonate with each client can be created that match a client’s demographics, financial goals, and risk appetite.

Utilizing omnichannel marketing, firms can ensure consistent messaging across various platforms such as social media, websites, and email campaigns. By integrating customer data and utilizing personalized communications, wealth management marketers can ultimately build trust and ongoing engagement.

Empowering the next generation of wealth management advisors.

Data-driven technology solutions are reshaping the wealth management industry and not a moment too soon. With an aging population of advisors retiring, firms are losing their most experienced and trusted professionals. The next generation of advisors coming on board will be the ones to address this incoming market of mass affluent and new generational wealth. These advisors will need to be trained quickly and given the technology resources needed to be successful in growing their books of business.

By using AI-backed technology, this new generation of wealth managers will be able to create personas that fit within their skillset and identify their own target audiences, enabling them to be much more successful with each lead. Advisors will be more agile in providing advice and outreach to quickly address changing market conditions. And they will be able to differentiate themselves among their competitors by providing a truly personalized approach to investment strategies and client relationships, going beyond standard service offerings.

Turning to data to meet today’s needs of the growing mass affluent market.

The traditional wealth management model that has catered to high-net-worth individuals has been struggling to effectively serve the growing mass affluent and HENRY clients. These prospective clients, characterized by different needs and lower investible assets, present a significant opportunity for wealth management firms to embrace a data-driven approach to reach these clients.

By turning to AI-powered technology, wealth managers now have access to detailed transactional information, demographic information, and external market data. Using this data, they can more confidently create highly customized investment strategies for these new market segments, fostering stronger client relationships and driving long-term growth.

For those targeting HENRYs, data-driven recommendations could include wealth accumulation strategies to save for a house down payment, or to start a business, or investor portfolio recommendations or tax-optimization tools. For wealth managers catering to the newly affluent due to generational wealth, data can be leveraged to understand family dynamics and potential future wealth transfers. Advisors can provide strategies that perpetuate the establishment and preservation of generational wealth and develop plans for inter-generational wealth transfer and estate planning.

Unleashing the future of wealth management marketing.

The wealth management industry is at a pivotal juncture, driven by the potential growth opportunity of the mass affluent and HENRY segments. To capture these two important and growing segments, wealth managers must adopt a data-driven approach, leveraging technology platforms and predictive analytics to offer personalized, efficient, and effective services. This includes integrating client information into CRM systems, utilizing AI for transparency, and keeping advisors updated with real-time client data.

By embracing these technology and market trends, wealth management firms can break down traditional barriers, foster deeper client relationships, and achieve superior outcomes. Focusing on innovation, tailored solutions, and digital tools will meet the evolving expectations of new investors and position wealth management firms for long-term growth and success in a rapidly changing landscape.

EXL, a global analytics and digital solutions company, has deep domain expertise in financial services and offers data-driven, AI-powered technology solutions and services. EXL partners with wealth management firms to provide technology solutions that drive better business outcomes and unlock growth with speed. We can help you quickly create and manage omnichannel campaigns featuring personalized customer journeys to secure, onboard, and retain trusted wealth management client relationships.

^1. https://www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045#:~:text=Cerulli%20projects%20that%20wealth%20transferred%20through%202045%20will,while%20%2411.9%20trillion%20will%20be%20donated%20to%20charities.

^2. https://www.ey.com/en_gl/insights/wealth-asset-management/global-wealth-research-millennial-trends

^3. https://www.riaintel.com/article/2bujzkg6xea9hjpl5jshs/practice-management/wealth-managements-double-attrition-problem#:~:text=With%20little%20headcount%20growth%20and%20close%20to%20two-thirds,danger%20of%20leaving%20the%20practices%20of%20retiring%20advisors.