As banks have evolved to serve Millennials and Gen-Z customers, they’ve adopted a host of digital-first strategies, from digital on-demand advising to robust financial literacy libraries.
But one area of banking that’s still stuck in the past is wealth management. Despite the fact that Millennials are starting to make up a larger proportion of those using investment and wealth management services (even though they control a much smaller percentage of wealth in the U.S. than older generations), private banks, in particular, have not yet evolved their offerings to meet the expectations of these younger customers.
So I was interested to hear thoughts from Karam Hinduja, the CEO of the private bank S.P. Hinduja Banque Privée. One of his priorities has been tailoring the bank’s offerings to resonate with the values of new generations of ESG investors, aligning capital growth, asset protection, and holdings management with a commitment to mitigating sustainability risks.
He shared some of his tips for private banks looking to succeed with new clients.
Millennial investors are more conservative than many in the industry assume.
“There’s a misconception that the Millennial generation is speculative and aggressive in its investment approach,” Hinduja says. “In fact, the new generation of investors are highly strategic and relatively conservative.”
This is borne out by the data, which finds that Millennials are more risk-averse than previous generations.
Banks need to stop laboring under this misconception in order to give Millennials and even Gen-Z investors (a group that is slowly growing) the kinds of services they’re actually interested in, not to mention the financial education and knowledge they need to understand how to invest conservatively and safely.
Millennials’ interest in sustainability and social responsibility extends to investments.
The Millennial generation is famously committed to supporting businesses, endeavors, and individuals who embody their social and environmental values.
Hinduja himself shares this commitment, and so has focused closely on incorporating social responsibility and sustainability into his bank’s operations and services.
“Today’s investors understand that wealth is about more than mere financial returns—that ‘true value’ is rooted in adherence to social and environmental principles,” he says. Given the risks of the climate crisis and other long-term challenges, any sound long-term investment strategy must regard taking a sustainable approach as standard, rather than as an alternative.
Hinduja has sought to partner his bank with individuals, families, and businesses that share his outlook, viewing the private banking business as a mechanism and vehicle for realizing not only ethical but sustainable principles, as well as growing wealth.
“Impact investing” doesn’t go far enough
Impact investing is an approach that’s growing in popularity, and it’s achieved some admirable goals—among them, simply making investors and the general public more aware of how their money affects the world, from ethical industries to sustainability.
However, Hinduja says, it’s not enough to be an impact investor. That alone doesn’t go far enough. “‘Impact’ as a term doesn’t even make sense–it’s just investing,” Hinduja says. “The more dire our global challenges become, the more we need to mobilize capital and entrepreneurship. Addressing these global challenges is the greatest of market opportunities of our generation.”
Like the banking, investment, and wealth management sectors evolve, we’ll continue to see more and more focus on the kinds of values-based offerings that Hinduja is already a proponent of. The question for financial institutions going forward will be how they meet the challenge.