Banca Mediolanum: A comprehensive and persona-based wealth offering

Some studies suggest that at the end of a generational transition, heirs look for a new financial advisor after acquiring their parents' wealth. What are you doing to build customer loyalty and prevent heirs from transferring their money to other institutions?

At Banca Mediolanum we can boast an offer that covers the needs of our clients throughout their life cycle: current account services, investment services, mortgages and credit solutions as well as pension and protection solutions. An offer that provides solutions able to satisfy the needs of all members of the household. In addition, for private customers we have created Mediolanum For You Club, an offer of exclusive banking services, dedicated events, special conditions on products/services which can also be extended to family members. 

Further actions in the development phase concern the creation of a concept of a relational nucleus built around the family will allow us to map and manage in a much more effective way the relationships – not just within the family – considered important by our client. A concept of relational nucleus which, for private customers, will be supported by an evolved consulting model which takes into consideration the needs (current and future) and the assets of the entire core of the customer's relationship.

The theme of the generational changeover not only concerns our clients but also extends to the members of our network of financial advisors. In fact, Banca Mediolanum has launched a project called Mediolanum Next, which aims to attract young talent to the world of financial consultancy. The young professional acquires the technical knowledge of the profession through a six-month executive master organized by Mediolanum Corporate University. Subsequently, the young banker works alongside our best professionals, wealth advisors and private bankers, in an on-the-job training course for a virtuous co-management of the senior's portfolio aimed at identifying the financial solutions that best fit the life projects of the families assisted. 

In addition, thanks to the presence of a new generation of financial consultants, senior consultants are also more effective in attracting the children of clients already in their portfolios. 

Through this mechanism, the dynamics of generational changeover becomes natural, since the children, who represent the clients of the future, will already find themselves managed by a new advisor after the senior has completed his or her career.

Mediolanum Next therefore represents a solution that not only aims to respond to the increasingly complex demands of clients, but also to the need to manage and guarantee a handover between quality consultants.

How is generational handover advice approached? How does it differ from typical financial advice?

Our basic consultancy focuses on the financial component and on the assessment of the adequacy of investments and their monitoring. On the other hand, our evolved advisory model introduces much more in-depth analysis of the client's assets, of his family unit, of his financial needs, as well as a more advanced level of monitoring.

Within the framework of our evolved advisory model dedicated to private clients, there is a specific wealth planning service carried out with the support of specialists from our Wealth Management department. This is a tailor-made service which, starting from a careful analysis of the assets of the whole family - carried out by a specialist who analyzes the assets, the family structure and the succession objectives - supports our clients in defining the best investment and wealth planning solutions for the transfer of their wealth.

Ultimately, our advisory model is based on the specific goals of the individual client, referred to as goal-based. What are your plans throughout the life cycle? For what purposes is he setting aside his savings? How soon will you need your money? Based on the answers to questions such as these, we construct our consulting proposal in such a way that the client does not have to deal with critical issues when the need arises. 

For the concrete implementation of the identified solutions our client can then activate our private insurance products or the support of external professionals for wealth planning solutions.

How different are Millennials from previous generations? How different are their expectations and behavior?

The Millennial generation has significant differences from previous generations. 

In terms of education, they are much better educated. Among Millennials, about four in ten (39%) of those aged 25 to 37 have a bachelor's degree or higher, compared to only 15% of the Silent generation (born between 1928 and 1945), about a quarter of Baby boomers (born between 1946 and 1964) and about three in ten from Generation X (born between 1965 and 1980).

Looking at income aspects, Millennials with at least a bachelor's degree and a full-time job had median annual earnings valued at $56,000 in 2018, roughly equal to those of Generation X workers with a college education. But for Millennials with lower educational qualifications, annual earnings were at a lower level than their counterparts in previous generations.

In addition, for Millennials, the likelihood of living at home with their parents for longer periods is more likely. In 2018, 15 percent of Millennials (ages 25 to 37) lived at home with their parents. This is nearly double the share of early Boomers and Silents (8% each) and 6 percentage points higher than Generation X.

This phenomenon is particularly evident among Millennials with less education. Millennials who never attended high school were twice as likely to live with their parents as those with at least a bachelor's degree (20% vs. 10%). This gap was essentially nonexistent in previous generations. In fact, a roughly equal share among the Silent generation (about 7% each) lived in their parents' home when they were between the ages of 25 and 37, regardless of education level.

The final difference is that Millennials create their households later than their counterparts in previous generations. Just under half (46%) of Millennials ages 25 to 37 are married, a steep decline from the 83% of Silents who were married in 1968. The share of 25- to 37-year-olds who are married has declined steadily for each successive generation, from 67% of early Boomers to 57% of Generation X.

In terms of their approach to financial issues, younger generations welcome new technologies as a way to manage their finances, primarily through smartphones. They also view with interest new areas of investment, such as cryptocurrencies. The younger generation is also more sensitive to sustainability issues, with four out of five stating that they take ESG criteria into account in their investment decisions. Considering the elements that characterize the new generations, we too are necessarily re-evaluating our offer model to attract and retain the younger segments of the population.

How have you transformed your Wealth Management offerings to cater to new generations? And how are you engaging potential new clients?

As we have already noted, we are developing our model of evolved consultancy so as to be able to map the subjects and relationships that are relevant to our clients in order to construct an investment plan (not only financial) that can reconcile the assets and needs of the entire family nucleus from an intergenerational perspective. We also rely on machine learning tools to identify specific personas and targeted marketing actions towards specific members of the core relationship. 

In addition, for the new generations, we have launched the new Selfy account, which aims decisively at a smart target of "young digital adults" thanks to the offer of a complete digital banking service that goes alongside the bank's traditional digital account and the recent proposal of Flowe for younger people, attentive to the issues of wellbeing and sustainability, which in a short time has already won over around 700k users.

According to Accenture research, the current Wealth Management advisory model is not effective for female clients. Do you notice any differences in terms of women's investment approach compared to men's? Are there any examples of this? And how have you adapted your offering to better serve female clients?

BMed's offer model does not follow a logic linked to the gender of the clientele, but uses a segmentation criterion based on personas. 

The personas are created by means of AI and machine learning techniques and represent a segmentation of Mediolanum customers on the basis of needs, both real and financial, linked to the life cycle of the individual. 

Together with the sphere of needs, they also investigate financial attitudes and preferences regarding the relationship with financial intermediaries (to cite some examples: sensitivity to sustainability issues, propensity to use digital tools, level of multi-banking).

The personas provide the family banker with a "key to understanding" based on the exploration of needs, therefore they can be used to facilitate the commercial consulting process, so that it can meet the real needs of the client.

Technology is now being used to digitize almost every area of a bank, but advisory still remains complex to automate. How is your bank approaching the integration of AI within the advisory service? Will it be a blended model? Will the human aspect always be required in Wealth Management services?

The professionalism and expertise of our Family Bankers and Wealth Management specialists will always be key in analyzing our clients' needs and finding the most appropriate investment solutions. Of course, AI and machine learning technologies will be increasingly present to support the activities of our Family Bankers. We make use of personas and advanced clustering methods to efficiently identify needs of our customers and generate targeted marketing actions. In addition, the use of robo-advisory algorithms helps our wealth management specialists in the generation of personalized investment proposals for the clients of our advanced advisory services. 

It should be noted, however, that advisory remains strongly anchored in the concept of client relationships. In this sense, the financial advisor represents the central figure in the development of the relationship. 

At the same time, the profession of financial advisor has evolved, markets and regulations have changed and financial advisors are required to have greater competence in various areas. For this reason, Banca Mediolanum has formed teams of experts in the most varied subjects (so-called "Specialists"), from credit to protection, to the generational transition, to work alongside the professional, thus creating a team game capable of further strengthening the relationship between client and consultant.

How will Wealth Management evolve in the next decade? (open banking, platform, new players, new technologies...)

One of the trends already underway today is the progressive separation of the service component from the financial products. Clients will be increasingly inclined to pay for value-added advisory and wealth planning services regardless of the underlying product types. This will also favor the entry of new players in the sector (e.g. independent consultants or platforms based on robo-advisory services) but not to a significant extent. The centrality of advice and relationships, on the other hand, will favor business models such as financial advisory networks.

Wealth management solutions will have to be increasingly linked to the real needs of the client and not to abstract concepts of performance, time horizon, and volatility. The viewpoint can no longer be predominantly financial, but will have to consider protection, credit, pension and inheritance needs in a truly integrated manner. 

As mentioned above, the human factor will always be fundamental, but technologies will be increasingly present to facilitate the distance relationship and the exchange of information between client and consultant. Machine learning technologies and robo-advisory algorithms will increasingly help to identify needs and ground truly personalized solutions.

From this point of view, the new technologies linked to the theme of open banking also represent useful tools to further strengthen what Mediolanum has long considered fundamental, namely the centrality of the client. In fact, thanks to the account aggregation services, made possible by the PSD2 regulations, Mediolanum is able to offer its clients a view of their total assets, including those held with other institutions, thus placing itself increasingly as the bank of reference for its clients.