With wealthy under-50 investors making up 29% of total affluent investors in the United States – and growing - the big question for wealth management firms is how to gain more wallet-share from this critical client segment.

According to a Cisco Wealth Management Study released Tuesday, this high-net-worth, under-50 group of investors is an $18.6 billion revenue opportunity for financial services firms. And the key to attracting- and keeping- these clients is technology.

Cisco Internet Business Solutions Group, the company’s global consultancy, surveyed more than 1,000 wealthy U.S investors, which are those with a minimum of $500,000 in investable assets, and found that not only are wealthy under-50s more likely to switch financial advisers than older investors, but they are willing to move at least some of their assets to a firm that provides advanced technological capabilities, such as high-definition video conferencing both at home and in the office, video messaging and applications for tablet PCs.

While Robert Waitman, director, Cisco Internet Business Solutions Group, Financial Services Practice, said his team expected technology would be important to younger clients in the 30 to 35 year old age group, what was surprising was that the next tier of client – from 35 to 50 - are comfortable using technology in their everyday lives and they want to use it in their financial lives as well.

“The under-50s are open to new technologies and that creates an opportunity for firms to do something different,” said Waitman in a phone interview Monday.

This under-50 group is moving into “the absolute sweet spot of wealth management firms,” Waitman said: They aren’t retired yet so they still have earning potential; two-thirds of respondents are expecting a significant over the next ten years; and they are looking to use technology to connect with their advisors.  

Meanwhile, this critical group expects to get even wealthier. Sixty-seven percent of wealthy inmvestors under the age of 50 expect to receive a substantial gift or inheritance in the next 10 years, according to the survey. Other findings from the study include: 27% have switched advisers in the past two years, compared to 10% for older clients; 32% are likely to switch financial advisors in the next year; 38% of wealthy under-50s with a financial advisor interact daily or weekly to discuss investments, compared with 7% of older clients; and 39% of wealthy under-50s spend at least eight hours per month managing their investments.

The key is wealthy under-50s want to talk to their advisors early and often and expect their advisors to be able to use the latest technologies, beyond in-person meetings, phone and e-mail. In fact, 63% are interested in having access to professionals via two-way high-definition video rooms; 63% would consider moving assets to another firm to access two-way high-definition video to meet with multiple experts; 52% would like to receive video messages relevant to their investments on their PC or mobile device; 55% are interested in using a tablet PC to interact with their financial advisor or firm; 66% are interested in joining social investor communities; and 55% have used social networks for investment advice.

To be sure, wealth management firms have focused the majority of their attention on the older segment of the population, said Jörgen Ericsson, vice president and global lead, Financial Services Practice, Cisco Internet Business Solutions Group, Financial Services Practice, on Monday. But with this under-50 segment expecting a lot more contact with their advisors, banks will need to use technology to connect with clients. “It will not be possible to meet face-to-face with each and every client,” he said.

“The facts we found were undisputable,” Ericsson said. “The wealthy under-50 investor constitutes a significant untapped potential for wealth management companies, especially in an environment where organic growth opportunities are rare. Success with the wealthy under-50 segment will require a new strategy involving tighter, more valuable interaction. The battle for the wealthy investor has only begun.”


Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access