Banks can attract the next generation with integrated wealth management and trust services

The banking industry is experiencing a paradigm shift as clients, particularly the most affluent, seek a more holistic approach to managing their finances.

In fact, according to a 2023 McKinsey survey, approximately 30% of investors prefer consolidating their banking and wealth management relationships, with this preference rising to 73% among younger investors aged 25 to 44. This trend is driving a convergence of banking, trust and wealth management services to meet these changing client preferences.

Traditionally, banks have provided fiduciary services through their trust departments, providing trust administration and foundational wealth management services. However, there is an opportunity to expand these services to include more extensive financial guidance encompassing wealth creation, preservation and distribution.

This expansion can deliver significant benefits to clients and help financial institutions, especially smaller regional and community banks, differentiate themselves in a highly competitive environment.

Mapping the competitive landscape

In today’s market, several players compete with bank trusts by offering holistic financial experiences. Wealth management is increasingly seen as not merely an option for bank trusts, but a critical component of their value proposition.

According to a Deloitte study, 78% of banks plan to significantly enhance their wealth management services within the next two years.

Furthermore, local RIAs pose growing competition as they expand their services, including trust management, often through working with fintech companies, in response to client demand.

By converging wealth management and bank trust services, banks can capture market share among high and ultra-high net worth individuals (HNWI/UHNWI) and attract the next generation of affluent investors, who have shown an even higher affinity for a “one-stop shop” when it comes to their finances.

Appealing to the next generation

Millennials and Gen Zers are set to become the wealthiest generations in history, making up a significant portion of the future client base for bank trusts. Baby boomers currently hold 50% of all wealth in the United States across various asset classes, according to Federal Reserve data. Over the next 20-30 years, this wealth will undergo a significant transition to younger generations in what’s known as the Great Wealth Transfer, estimated at approximately $72.6 trillion by Cerulli.

Next-gen clients are particularly focused on securing their financial future and preserving their wealth for future generations. A study found that 84% of high-net-worth and high-earning-not-rich-yet (HENRY) Millennials worry about their financial future but do not know what steps to take to secure it. Furthermore, according to Trust & Will, 78% of Millennials view building multigenerational wealth as a goal, a sentiment shared by only 45% of older generations.

These realities underscore the need for clear, accessible financial guidance and tailored planning services. While these generations do not make up a huge portion of the UHNW/HNWI group just yet, there is an opportunity for bank trusts to position themselves to serve them in the future by offering personalized, holistic solutions.

Delivering integrated wealth management and trust services

Integrating wealth management and trust accounting systems allows financial institutions to streamline workflows and eliminate data silos, significantly improving operational efficiency. This efficiency alleviates the administrative load on advisors, which currently consumes approximately 30% of their time, as reported by McKinsey & Company, freeing up more time for client relationship building and strategic planning.

Financial advisors manage a wide array of responsibilities across disparate systems, including research, portfolio management, client communication and account administration. Clients expect a seamless and efficient experience from their wealth advisors, and a fragmented workflow can result in delays in communication and a less personalized service experience. Unifying these systems can enhance efficiency; a study by Aite Group found that financial institutions that integrate wealth management and trust platforms experience a 20% boost in advisor productivity.

Expanding wealth management service also opens new avenues for growth for financial institutions. Banks can attract and retain HNWIs by providing integrated wealth management and trust solutions. Moreover, wealth management represents a higher-margin business, delivering substantial financial benefits to banks that effectively incorporate these services.

Integrating wealth management and bank trust services is a strategic imperative for financial institutions seeking to excel in a competitive market. By consolidating systems, harmonizing data, and training advisors, banks can effectively deliver integrated solutions that meet the evolving needs of affluent clients. Clear communication about the benefits of these combined services, coupled with key performance indicators to measure efficiency, advisor productivity, and client satisfaction, will be essential to realizing the full potential of this integration.

Matt Matrisian is SVP and Head of Client Growth at AssetMark.