Financial Institutions Seizing Opportunities in the Transference of Wealth from Baby Boomers to Generation Z
Banks Embrace Family Banking Strategy to Capture Generational Wealth
In a bid to tap into the vast pool of generational wealth, banks are shifting their focus towards a long-term, multigenerational strategy. This approach, known as "youth banking that's built for parents," aims to engage the family dynamic, creating a family banking relationship that spans across generations.
According to Dylan Lerner, Senior Analyst in Digital Banking at Javelin Strategy & Research, this strategy involves banks working closely with seniors to foster their independence by addressing their unique needs. Seniors, who are increasingly comfortable with digital banking thanks to apps that simplify other aspects of their lives, present an opportunity for banks rather than a threat.
Banks can position themselves as family banks by focusing on the comprehensive wealth needs of seniors while building trusted relationships with their heirs and descendants. This approach requires tailoring services to support wealth transfer, education, and long-term family governance.
Key strategies include serving seniors’ financial and estate planning needs comprehensively, developing multigenerational engagement plans, offering bespoke, concierge-style services, formalizing succession planning and governance structures, building trust through clear communication, and leveraging innovative financial strategies like Infinite Banking.
Older people are not just banking online but are also moving towards mobile banking. Seniors are more open to technology than many banks realize, using it for various purposes, albeit in different ways from younger people. This shift presents an opportunity for banks to attract and retain senior customers.
However, many banks view seniors as a problem, particularly community banks with a large senior customer base, fearing a significant loss of customers in the future. To overcome this, banks must shift their thinking and focus on the intergenerational transfer of wealth, rather than just on individual banking relationships.
A broader strategy for banks involves creating bigger experiences for senior clients, fostering independence, and bringing in family members to meet their needs. To become a family bank, a bank must build a relationship with the child to become their primary bank in their later years.
In conclusion, banks aiming to become true family banks must move from transactional service towards a holistic family wealth partner role. This approach helps banks differentiate themselves by aligning deeply with family values and legacy concerns rather than focusing solely on immediate financial products or services.
In this family banking strategy, banks aim to extend their services beyond personal finance, venturing into wealth management and business aspects, thus catering to the comprehensive financial needs of seniors and their heirs. This shift allows banks to foster generational relationships, ensuring continuity and growth of family wealth for future generations.
Banks, by adopting a holistic approach that encompasses wealth transfer, education, and long-term family governance, can transform themselves into trusted family banking partners, going beyond mere providers of financial products and services.
