You Want Wealth Or Knowledge?

The recent, and in some countries, still ongoing lockdowns triggered by the coronavirus (Covid-19) outbreak have seen families thrown together in a way many have never been before, both globally and in Thailand.

An unprecedented global threat, the coronavirus looks set to change the way we think, work and live -- not only in the short term but also in the long term.

At the forefront, and driving this transformation, is the Next Generation.

Banks, including wealth managers, are also facing winds of change. The next generation of clients, with their need, desire and drive to make a difference, are poised to bring to the wealth management industry the disruption that technology has yet to trigger.

Wealth management teams have something of an advantage in that they stand alongside what could arguably be the secret of their own future, and potentially the answer to the future of capitalism: family dynamics.

So, what can wealth managers can learn from families?

In Thailand, family units are often very close, some with different generations living together. Successful family dynamics -- merging the different needs and hopes of the young and old with a firm eye on the future -- also offer powerful insights and ideas for both governments and businesses, including wealth managers.

We see three particular areas where wealth managers can specifically learn from successful families:

Edwin Tan, head of wealth management in Thailand with Private Banking Asia Pacific, Credit Suisse. Supplied/Credit Suisse

1. Incorporating the future early on:

In the Global Next Generation Report -- published last year by Credit Suisse and the Young Investors Organization (YIO) -- the next generation told us that one of the success factors for a smooth transition and adaptation of family responsibilities (e.g. in the family business) was to involve the next generation at an early stage.

This was crucial, they explained, so that they had time to learn and understand the business, their responsibilities and their future prospects. Thanks to early involvement, the next generation was also able to not only make sure their view was heard, but also to gain the experience for their views to be respected.

Wealth managers are often focused on the issues of today, short-term results and expectations. To strengthen their business in the long run, it is essential that they too include the next generation as early as possible -- to help build a business model that serves the needs of their future clients.

The next generation wants to experience the bank early on, to be involved in the value proposition. A wealth manager cannot just assume what future clients will want; they need to experience it first-hand alongside their future clients.

The report also revealed that the next generation will want more than a traditional investment adviser, but rather a long-term life partner with whom to co-create solutions, an equal sparring partner who genuinely cares about their well-being.

Impact investing has been an important tool that Credit Suisse Private Bank Asia Pacific has been using to engage its next-generation clients. The report found that 27% of next-generation leaders cited "creating a positive impact in society" to be the most important thing to them in building a legacy. Separately, 24% are already invested in impact investments and an additional 62% said they were interested but not yet invested.

For the next generation of clients who are just starting to secure some control over the management of their family wealth, and are very passionate about the topic, they are eager to get educated on the topic and appreciate any platforms banks can provide for them to learn.

2. Togetherness: empowering the individual and the family as a unit.

Successful families have learned to develop into a thriving multi-skilled team, tapping into the abilities and talents of different generations and individuals, while focusing on the benefit of the family as a unit. Wealth managers should apply the same approach.

Banks often have access -- internally or externally -- to a deep and diverse pool of knowledge and skills. To truly support clients in the future, banks will have to systematically tap into this broad source of knowledge for the maximum benefit of their clients.

Wealth managers and their relationship managers will also have to apply a "network orchestrator model" that goes further than the bank's four walls. They will have to bring the next generation and their families together with other clients or approved providers in cases where that could help them find new solutions, learn from the experience of others or simply exchange ideas.

Viola Steinhoff Werner, general manager of the Young Investors Organization (YIO) Supplied/Credit Suisse

3. The courage of renewal:

Successful families have learned to listen and open up to the voice of the younger generation and see it not as a disturbing force, but rather as a fresh source of energy or a new attitude that triggers new ways of thinking and acting.

This process requires considerable communication and understanding from all sides. Sometimes it is messy and painful because, although families share the same goals, they might disagree on how to get there.

Banks are considered a stable and key part of a country's economy, supporting companies and families to achieve their goals. There is still, however, a need for continuous learning, development and improvement within banks.

Banks and wealth managers, like families, have to be prepared to enter into dialogue and face conflicts. They have to be open to discussion and input from their future partners in order to develop a bank of the future, rather than wait and have to scramble for survival when it is too late.

This can be seen in the response of Asian business families in moments of crisis such as the global coronavirus pandemic, which has dramatically affected commerce and business. Some business families have taken private their listed investment vehicles in order to be better repositioned to emerge through the crisis and to unlock fundamental value.

Such decisions are consistent with long-standing research which informs us that such families value their businesses as an inheritance, which provides an important source of continuity in the transfer of wealth between generations.

In fact, the latest Credit Suisse Family 1000 report found that family-owned companies outperformed their non-family-owned peers both in the short and long term, and are also proving more resilient amid the current Covid crisis. The biggest outperformance is in the Asia Pacific ex-Japan region where family-owned companies generated compound excess returns of more than 500 basis points per year.

Wealth managers serving first- or second-generation business families would do well to pay heed to such dynamics. It is our duty and in our interest to recognise and reflect the needs and desires of the next generation, and co-create a future that benefits all, inspired by the families with whom we work together.

We have to develop a culture of "we" and not only "me". Now more than ever.

Viola Steinhoff Werner is the founder and general manager of the Young Investors Organization (YIO), and head of the Global Next Generation and Families department at Credit Suisse.

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