Asset and wealth management always requires a keen understanding of clients' needs, wants, and goals. With so many different generations of investors coming through the door, from baby boomers to Gen Z, asset and wealth management firms must navigate and understand how to meet the changing needs and preferences of each generation they serve to remain relevant and successful.

As the US population ages, the demand for asset and wealth management solutions is shifting toward the younger generations. With most new direct brokerage accounts being opened by Gen Z and Millennials, wealth management firms must adapt by providing personalized, easy-to-use, and transparent solutions to meet the needs of these generations.

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For companies to remain successful, there is a need for a deeper understanding of each generation’s changing needs. Ultimately, the objective remains: ensuring clients' assets generate returns and preserve their value over time.

Generational difference: A call for tailored solutions

Wealth management companies face challenges adapting to different generations with differing priorities and technological innovations. Millennials prioritize mobile banking and online investing, while baby boomers prioritize one-on-one interactions and value their relationships with financial advisors more - companies must understand these differences to expand their reach.

The different generations also look for other ways to invest their money. Younger generations are more risk-tolerant and keen on socially responsible investing, whereas older generations prioritize capital preservation. According to Allianz Life Insurance Company, 85% of millennials prefer investing in socially responsible or impact investments, compared to 37% of baby boomers.

Baby Boomers: A wealthy yet risk-averse generation

As the wealthiest generation in history, baby boomers are now retiring or entering their golden years, seeking consistent income. However, many are risk-averse, making it challenging for asset managers who must carefully manage their portfolios. Without significant financial instruction, many baby boomers rely on family and friends for financial education.

Gen X: Navigating financial challenges

Generation X, or the sandwich generation, is financially stretched as they support their children and elderly parents. They must balance their present obligations with retirement savings as they enter their peak earning years.

Millennials: Tech-savvy and socially responsible investors

Millennials prioritize technology when managing their finances and seek socially responsible investments that align with their value. This generation isn’t afraid to take on debt but wants tools to help them manage it. Financial education primarily comes from online searches - 65% pursue financial education and guidance and desire to align their investments with political, economic, and environmental concerns.

Gen Z: Looking for Long-Term Investments

Gen Z is the newest workforce generation focused on long-term investments that will help them achieve their goals. The pandemic led 53% of Gen Z to focus on their financial literacy, and they look towards their family, friends, and social media for financial education. Gen Z shows the highest entrepreneurial spirit, desiring to freelance and start new businesses, but they still need their parents to learn about key concepts.

Expert opinion

By Letizia Royo-Villanova, Ventures Associate in Fintech at Plug and Play

The wealth space has undergone a huge digitalization in the past year, mostly driven by more personalized products and access to traditionally excluded individuals. With new technological advancements, we can expect the rise of new companies to transform even more space, as seen with startups now using generative AI to support individuals in their financial needs, such as Parthean.

Personalization has been a key driver of new solutions in wealth management. We have seen many startups targeting specific demographics and building solutions to address their needs.

One in six people will be aged 60+ by 2030, according to a recentWorld Health Organization report. But baby boomers, aka the silver economy, have started saving for retirement later than any other generation, likely due to a lack of proper financial literacy, which is why we now see many companies leading seniors through their Medicare maze (e.g., Connie Health) or giving older generations some autonomy with their money but with visibility from another person (e.g., TrueLink).

On another note, according to theNew York Times, $84tr of wealth is expected to be transferred from American boomers to millennials and Gen X; it’s not a surprise that startups are offering specialized products to these generations, with many of these have a big focus on personal finance tools such as saving and investing (e.g., Wealthfront).

Gen Z and X are the most tech-savvy generations, relying on technology and social media for financial education. We have seen a growth in interest from this customer base for social wealth platforms and solutions that match their values, such as sustainability and inclusion (e.g., Alinea). Startups attempt to capture clients from a young age, even offering financial products to kids (e.g., Greenlight) while helping them better understand financial services.

We’ve also seen an increasing number of startups helping all of these generations with retirement planning (e.g., Retirable) while adapting their services to each of these generations' needs, for example, by offering consultation to older customers.

Lastly, we’ve seen a trend in startups democratizing access to alternative investments that were traditionally only available to a few. These include Real Estate, Art, Luxury Goods, Agriculture, Private Equity, and Venture Capital Funds (e.g., Poolit, Alt). With the rise of AI technology and open banking, we can expect more personalized and engaging services and financial advice while also seeing B2B companies also support wealth advisors and investors with tools to improve their offerings.

The future of asset and wealth management

Asset and wealth managers face a huge task in meeting the financial goals of multiple generations. The key to addressing the unique needs of each individual lies in using tailored solutions and effective communication. Asset and wealth management companies must adapt to the changing landscape of multigenerational needs to stay ahead of the curve and remain relevant and competitive; companies in this field can achieve these goals by partnering with startups and embracing innovative, flexible action plans. These strategies can help firms thrive in a dynamic financial landscape.

Discover how our corporate partner, Deutsche Bank API, tackled the common challenge of finding the perfect startup for a specific project. Don’t miss this video and learn how they teamed up with Plug and Play to overcome this issue and find the right match.

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