The coming decades will witness a financial phenomenon unlike any other: the Great Wealth Transfer. Baby boomers, the wealthiest generation in history, are poised to transfer a staggering $72 trillion to their heirs over the next 20 years. [1] This presents a massive opportunity for financial services firms, but also a significant challenge – identity data.
The Complex Landscape Emerging
Building relationships and understanding the financial needs of heirs isn’t straightforward. Unlike their parents, who have a long-standing relationship with their financial institution, many heirs aren’t connected to the same financial institution. Furthermore, their data is often scattered across different sources – from student loans to social media profiles – making it difficult to get a complete picture. Here’s a deeper look at the complexities:
- Fragmented Data: Heir data isn’t readily available in a centralized location, making it a challenge to build comprehensive profiles.
- Advisor Turnover: Statistics suggest that over 70% of heirs will switch financial advisors after inheriting wealth. [2] This highlights the need to build trust and understanding early on.
- Engagement Gap: Without proactive outreach and engagement, a significant portion of this wealth could be lost to competitors.
The Data Dilemma: A Missed Opportunity
Financial services firms risk missing out on this windfall if they can’t effectively leverage data. Here’s why:
- Data Silos: A staggering 40% of financial services executives admit to having data siloed across different systems, hindering a holistic view of their customers and their heirs. [3]
- Underutilized Data: Even though data is collected from various sources like banking transactions and investment accounts, less than half of providers use it to personalize experiences for their customers. [4] This lack of personalization extends to heirs who could benefit from early engagement.
Bridging the Gap: Mastering Data Management
By implementing robust data management solutions, financial services firms can transform the way they interact with both their existing customers and their heirs. Here’s how:
- Referential Data & Strong Reference Databases: Implementing identity matching technology can help create a unified view of customers and their heirs. This technology connects individuals based on shared information, allowing for personalized experiences and proactive engagement. Furthermore, robust reference databases can be used to locate heirs after a customer’s passing, ensuring a smooth transition of wealth.
- Benefits of a 360-Degree View: A consolidated view of customer information paves the way for several key advantages:
- Increased Customer Retention: Meeting the evolving needs of both clients and their heirs fosters loyalty and reduces churn.
- Proactive Engagement & Personalized Experiences: Tailored offerings based on individual preferences and circumstances build stronger relationships with both generations.
- Enhanced Operational Efficiency: Streamlined data management processes save time and money.
The Future of Financial Services: Meeting Evolving Needs
Today’s financial services consumers are demanding personalized experiences and are quick to switch providers if their needs aren’t met. Their heirs will inherit this same expectation, making the Great Wealth Transfer a critical moment for the industry. By embracing data-driven solutions, financial services firms can position themselves to capture this opportunity and thrive in the years to come.
Learn more about Verato for Financial Services
Sources:
- [1] 1 Cerulli Associates, “The Cerulli Report: U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021.”
- [2] https://www.cerulli.com/press-releases/aging-boomers-bring-intergenerational-planning-to-the-forefront
- [3] https://forms.workday.com/en-us/reports/digital-acceleration-considered-approach-to-change/form.html?step=step1_default
- [4] https://www.equifax.com/business/blog/-/insight/article/new-study-financial-institutions-not-leveraging-customer-data/
