The typical HNWI image is changing as younger generations come into the fray and women take more charge of wealth. Does this mean alternative practice is needed? And what needs to change? Are the values shifting in the wealthy? Patrick Brusnahan writes

Annabel Bosman, head of relationship management, RBC Wealth Management, and Katherine Waller, head of new sales delivery, RBC Wealth Management, talk about this new wealth.Royal Bank of Canada (RBC) is one of the most prominent names in banking worldwide.It posted net income of C$3.85bn ($3.07bn) in Q1 2021, up 10% year-on-year for the three months to end-January.

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The earnings beat analyst forecasts and benefit from strong volume growth and increased client activity. This is partially offset by the impact of low interest rates and higher expenses.

Specifically, the RBC Q1 2021 numbers represented record earnings in Capital Markets.

In addition, RBC posted positive earnings growth in Personal & Commercial Banking, Wealth Management and Insurance. Results this quarter also reflected lower provisions for credit losses, with a PCL on loans ratio of 7 basis points. This is largely attributed to releases of provisions on performing loans. Lower provisions on impaired loans also contributed to the decrease.

Wealth management net income rose by 4% year-on-year to C$649m. This was primarily due to average loan growth and higher average fee-based client assets.

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Patrick Brusnahan (PB): Do you see as younger generations getting more involved in wealth? Are there conflicting values? Stereotypically, and the truth is, younger generations are more into ESG and the likes of sustainable investments, whereas older generations might not.

Katherine Waller (KW): Some core values are the same.We have been talking about ESG and sustainability for years. But in 2020, companies with strong ESG credentials have tended to outperform, and the fair treatment of staff and other stakeholders has been in the spotlight far more. The generation that is now creating wealth is thinking more about what they are investing in as well as how.
Annabel Bosman (AB): It is an interesting point. I don’t think that the core values people have, such as empathy or compassion really differ much. The differences lie in how people interpret or deliver on those values. For example, women often see wealth as a means to achieving a series of goals, quite often for their family, whereas men can often think about wealth as the goal itself. And if we draw comparisons between generations, the young are frequently challenging their parents about what they are doing with their wealth to make a difference or have an impact.
It is not that the older generation don’t also want to make a difference, but perhaps they haven’t thought about their wealth as a means of expressing their core values for their family and wider society. Wealth managers are often the interpreter or the mediator in the room when these conversations are happening. It has become a vital part of our role.

PB: So how do you maintain this relationship? How different is it between say men and women, or the younger generation and the older generation? Obviously, you interact with different types of clients differently? Some require more communication. Some want to build a laissez faire relationship, how does it differ?

AB: It comes down to really understanding clients as individuals, part of which is working out what means of communication is going to work for them and putting a plan around that. We have obviously had to work on this over the last year as we all adapt to video calls rather than meeting face to face.KW: The time spent on the calls though is shorter. When client meetings took place face to face, there would typically be a number of meetings, each about an hour in length and covering different areas. Now, the trend is to have shorter conversations to get to know one another (especially when it is a new client or prospect), followed by a longer meeting which enables you to start understanding the client’s values and goals.AB: During the brief glimmers of hope over the last few months where we have been able to meet face to face, it was clear that clients were incredibly pleased to see us in person rather than through a screen. So much so that a recent meeting at a client’s house lasted five hours!

 

PB: Is that an unintentional consequence?

AB: I think this period has been a great leveller. Suddenly, you have got clients with children running in and out and pets sitting on desks and there’s great empathy for the situation that we are all in. It’s been interesting to experience how barriers between private bankers and their clients have been removed and relationships have become much more personal.

PB: Anything more to add?

KW: As women have increasingly become more prominent wealth creators over the last four or five years, we have certainly had a lot of conversations about determining their values and making decisions in line with these values.During lockdown, and as a consequence of spending more time at home, we have seen far more engagement in wealth management discussions among both women and men. In many conversations, we find that clients either want to have their spouse present, or at least to state their spouse’s priorities and objectives. Interacting with both spouses allows us to see any differences in their opinions, values and approach and to determine early on how decisions are made in relation to their wealth, which is obviously incredibly important.AB: Historically in my opinion, the financial sector has often been guilty of talking to the male client rather than both named account holders, particularly where assets may be held in a spouse’s name for wealth planning purposes.

RBC has joined the WealthiHer Network which has a focus on helping educate women to feel confident when it comes to talking about and managing their finances, and to challenge us as a sector to support with that education.

An unintended consequence of the last few months has been the conversations that we are having with both spouses, and the industry should use this as a catalyst to continue to involve all parties in financial discussions, regardless of who is the primary breadwinner.

 

PB: Why did it take so long for this shift?

AB: It has been happening slowly but it has certainly become more pronounced over the last year. I suspect it has a lot to do with the historic lack of diversity within our industry. There is a natural bias for clients to want to talk to and associate with people who are like them. As diversity across our industry has increased, there is both a push and pull element – we are seeing more in the way of challenge from relationship managers who seek to have an understanding of both account holders, plus female clients being more inclined to have those conversations with someone they feel understands their values.