The Great Wealth Transfer: Why FIs must work hard to preserve inheritors’ loyalty

The Great Wealth Transfer is well underway with roughly $124 trillion expected to be transferred through 2048. Of that amount, $105 trillion will go to heirs, with about $100 trillion passing from Baby Boomers to Gen X and Millennials. As this wealth continues to shift over the next 20+ years, there’s an opportunity for financial institutions (FIs) to retain current customers as well as to acquire new deposits.

Acquiring and growing deposits in the wealth transfer landscape does come with challenges. FI marketing teams increasingly must do more with less, and consumer behaviors continue to evolve. While 57% of consumers would stay with their current bank, they are open to switching to another FI if they receive attractive incentives. On top of that, nearly half would change to another bank to address specific needs.

With more wealth transferring to Gen X and Millennial heirs, FIs must focus marketing strategies on engaging the right consumers with the right messaging at the right time. It’s critical to maintain loyalty with customers inheriting this wealth as they could decide to keep that money in the bank or credit union that their family members used or look to take advantage of other offers elsewhere.

On top of it all, the cost to acquire deposits keeps increasing, meaning FIs must work both harder and smarter to retain and acquire deposits. In the case of the Great Wealth Transfer, banking strategists should deepen engagement with depositors’ households while preparing strategies to acquire inheritances in transition.

Use personalization to deepen engagement with wealth transfer heirs

For Institutions with an aging customer base, there is a real risk for deposit loss. Setting plans in motion now to appeal to broader demographics can help to keep those balances. For institutions with younger customers, it’s certainly reasonable to expect growth in their deposits over time, but the right engagement will be important for keeping those long-term.

FIs must focus on building multigenerational relationships. Use personalized and targeted campaign strategies across a range of channels to meet customers, prospects and families where they are. Community-based engagement that is informed by behavioral and personalized insights is critical to advertising in a way that feels authentic and draws consumers in.

Targeted marketing approaches with the right personalization help to establish relationships with younger generations and heirs – building rapport, trust, and familiarity before wealth transfer occurs. For example, a Southeastern U.S. credit union was able to connect with current members and prospects using data procurement, pre- and post-campaign analytics and multi-channel marketing to personalize connections and offers. This resulted in more than 1,100 new accounts being opened.

Match the right products and offers to the right people

Consumers overall are looking for value and positive experiences. This requires that FIs understand what products and offers will give each customer the most value over a long relationship.

Both print and digital marketing strategies must prioritize continuity and emotional resonance across generations. Approaches to deposit acquisition need to be nuanced and specific, meaning institutions must transition from transactional outreach to relationship-driven interactions.

FIs should leverage data-driven insight to personalize content, providing education and support tailored to the goals of those set to inherit from current customers. Overall, transparency, shared values, digital-first experiences, and tailored products are essential to earning the trust of wealth transfer beneficiaries. As an example, one 19-branch bank looking to improve account acquisition and increase the value of each account recently took advantage of insight from data around demographics, behavior and purchase potential to drive $86 million in total balances and a 340% return on marketing investment.

Plan now for what’s going to come

The Great Wealth Transfer is already in progress but still has a way to go. FIs cannot afford to be complacent. Now is the time to get new marketing and acquisition strategies in place to stay ahead of this shift and be true partners that can meet the needs of wealth transfer heirs.

Using data-driven approaches to understand what Gen Xers and Millennials want and expect could mean the difference between positive retention and a balance sheet shakeup. New customer growth will remain critical to replace any inheritance flight that may happen.

The next step now for FIs is to adopt acquisition and retention strategies driven by data and technology to truly safeguard long-term balance health.

Chris Phelan is Director of Analytics & Reporting at Vericast.