Marriage of ESG and technology a way to win millennial hearts
Technology which helps align clients’ ESG values with their investments can help private banks attract a younger customer base
Today’s wealth management brands are very much interlinked with sustainability and purpose, values which are especially dear to younger generations. Innovative technology which meets the widespread need for digitalisation in the sector and improves alignment of clients’ investments to their environmental, social and governance (ESG) values, can be a key differentiating factor for private banks, enabling them to win business from the elusive millennials.
“ESG technology is definitely a way of engaging millennials,” says Wally Okby, senior analyst at US consulting firm Aite Group. “Given the massive wealth transfer under way, and the high likelihood that inheritors will transfer assets to some other institutions other than where their parents or grandparents bank, it becomes imperative to think about ways to catch that fleeting dollar.”
What makes it so appealing, aside from the positive impact on the earth and society, is the ability to communicate that narrative and appeal to a person’s beliefs or core values. Telling a prospect that their investment in a security is helping to clean water, or deliver clean energy, or that their portfolio is helping reduce poverty, will surely resonate with them emotionally.
Plenty of technology is starting to develop in the ESG space, with an increasing number of fintechs competing for the attention of private banks. These often rely on partnerships with starts-ups or third-parties to enhance their impact investing proposition.
Morgan Stanley collaborates with several data providers to enhance its portfolio analysis and reporting app, Morgan Stanley IQ, which was launched a couple of years ago to meet client demand.
According to the latest survey from the Morgan Stanley Institute for Sustainable Investing, 85 per cent of all active US individual investors are keen on sustainable investing, with interest rising to 95 per cent among millennial investors. Ninety-one per cent of millennials are interested in receiving an impact report, versus 84 per cent of active US individual investors.
“The finding reflects a broader shift in how younger generations view their role in society, including where they want to work and spend their money,” believes Lisa Shalett, head of WM Global Investment Office and WM CIO, at Morgan Stanley. “With tools like Morgan Stanley IQ, our financial advisers are well positioned to grow wallet share with millennials and other investors seeking to align their investments with their values,” adds Ms Shalett.
Italy’s Banca Generali has developed a proprietary digital platform with ESG advisory firm MainStreet Partners, allowing private bankers to build customised, sustainable investment portfolios. In a country with the second oldest population in the world, customers under the age of 30 represent just 6.5 per cent of Banca Generali’s client base, but account for less than 1 per cent of the bank’s assets.
The greater focus on sustainable investment solutions, coupled with partnerships with fintech and cryptocurrency provider Conio and Danish Saxo Bank on the trading platform – aim to capture younger generations especially.
“We’re currently trying to involve younger customers to better understand their needs and be able to advise them better,” says Gian Maria Mossa, CEO and general manager at Banca Generali.
While the Covid-19 pandemic has increased client expectations for greater personalisation and full digital experience, across age groups, some behaviours and patterns are observed more in millennials than other generations, says Mariam Rassai, head of client experience and digital transformation at BNP Paribas Wealth Management.
“Digital is very much part of millennials’ day-to-day life, in all types of activities, they are more mobile and have some specific expectations when it comes to banking, around simplicity of the experience, mobility and immediacy. Also, they are extremely eager to have a positive impact on society and the environment,” she adds.
BNP Paribas’ platform MyImpact helps clients better understand the type of positive impact they can have, in line with the UN sustainable development goals, while helping private bankers appreciate client preferences and propose suitable investment solutions.
The French bank has discovered that almost 100 per cent of its clients who use the platform MyImpact and then interact with their private banker decide to reallocate their portfolio to sustainable investments. “This shows how attractive and powerful this experience is and is definitely part of what differentiates us,” reports Ms Rassai.