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A monumental shift in wealth is underway, with younger generations poised to inherit unprecedented sums in the coming years. This historic transfer, estimated at a staggering $21 trillion, presents both immense opportunity and significant risk for banks and credit unions. However, many financial institutions are overlooking a critical factor that could determine their success: the evolving financial needs and expectations of women.
According to Jean-Pierre Lacroix, president of strategic design firm Shikatani Lacroix Inc., an astounding 70% of this wealth transfer over the next three decades will go to women. This includes surviving spouses, as men often precede women in passing, and a growing number of women managing their own finances.
Addressing a Critical Blind Spot in Banking
Lacroix emphasizes a common oversight: most financial institutions lack a deep understanding of how women’s expectations of financial advisors differ from men’s. This knowledge gap poses a serious threat, especially as the peak of wealth transfers is anticipated within the next 15 to 20 years.
“This is the time to start planning,” asserts Lacroix, underscoring the urgency for banks to adapt their strategies now.
Key Insights for Financial Institutions:
- The Opportunity: Research by Shikatani Lacroix indicates that a significant portion of current investments are inherited, with many expecting further inheritances. This represents a vast pool of assets to manage.
- The Risk: Alarmingly, the same research reveals that 30% of inheritors choose to switch financial providers when wealth transfer occurs.
- The Reality: Banks failing to cultivate strong, multigenerational relationships today risk substantial business losses in the future.
Why Banks Are Missing the Generational Wealth Shift
While financial executives often discuss personalization, Lacroix points out that this is frequently limited to products rather than people. Institutions are aligning services with segments but often fail to truly understand the individual customer.
A key deficiency lies in banks’ inability to recognize fundamental differences in how men and women engage with financial services, particularly investments. Many institutions, he notes, still inadvertently ignore women as primary financial decision-makers, despite their increasing prominence in managing household funds.
For many women, issues like a perceived lack of knowledge or confidence in financial matters are solvable, but only if institutions acknowledge the need for tailored approaches. This means treating women differently from their male counterparts, while also recognizing the growing demographic of single women who independently manage their finances.
“Women are more inquisitive. They like to see more options. They need to be walked through information, versus just being sent the information,” Lacroix explains. He adds, “Women ask more questions, and they are often really the ones managing funds in the home.” Yet, bank practices frequently fail to reflect this reality.
A Disconnect in Practice: A Personal Anecdote
Lacroix shares a personal experience from helping his daughter purchase a condominium in Canada. Despite his wife being the primary bank relationship holder, all official documents and emails were addressed to him. This common behavior, he says, highlights a profound disconnect that not only alienates current female clients but also imperils future generational relationships.
actionable Strategies to Better Serve Women
To remedy this situation, both now and in the future, banks must:
- Empathize with Women’s Needs: Understand and address their desire for options, clear explanations, and a relatable approach to finance, acknowledging that money is often an emotional subject.
- Listen Actively: Lacroix advises bankers to talk less and listen more, a simple yet powerful strategy for building trust and understanding.
- Empower Female Advisors: Increase the presence of women in financial planning and wealth management roles within branches.
- Revamp Marketing Strategies: Move beyond generic “American families” or “small business owners” campaigns. Banks need dedicated marketing that directly addresses and resonates with women, including single women, reflecting their diverse financial roles. Current bank homepages, often laden with generic imagery, suggest a failure to truly connect with this crucial demographic.
Bridging the Intergenerational Gap
Beyond retaining current clients, institutions must proactively connect with the inheriting generation. While younger individuals have a growing array of financial options, including fintechs and digital platforms, the solution often lies closer than banks realize: asking existing clients to introduce their children to the institution.
While direct outreach based on beneficiary lists is inappropriate, requesting permission for an introduction can be a powerful first step. Lacroix recounts another personal instance where his bank missed an opportunity to connect with two future generations through a family transaction, a failure he attributes to advisor attitude and lack of training.
Financial advisors, often accustomed to a passive, “guru” role, must cultivate a more proactive, sales-oriented mindset. Key life-stage events, such as securing a mortgage, present opportune moments to introduce the concept of financial planning and wealth management. Institutions should staff up to facilitate impromptu meetings, perhaps with an advisor saying, “You’re taking a big step, buying a home. Could I introduce you to Jane Smith, one of our wealth management advisors?”
Nurturing Long-Term Relationships
Making the initial connection is just the beginning. Banks must then work to strengthen these relationships by:
- Ditching Stereotypes: Resist the assumption that younger generations exclusively prefer digital channels or AI for financial advice. Lacroix’s research shows that even AI users overwhelmingly consult human financial advisors, often using AI to prepare for these meetings.
- Embracing “Live” Interactions: Focus on physical meetings that bring generations together. This includes private sessions and family-oriented seminars. These gatherings, while not for baring financial plans, serve as invaluable opportunities for advisors to build relationships between parents and inheritors, laying the groundwork for the institution’s future success.
Source: Thefinancialbrand.com