Most banks are ignoring a crucial aspect of their customers' financial lives: their families. Among family members, there are complex relationships, varying degrees of financial independence and diverse philosophies about money — and all of these factors exert influence on how customers behave financially. To illustrate how dire these behavioral changes can be, consider that parents who provide financial assistance to their unemployed adult children work more, save less and may even curb their food intake to support their dependents according to a 2019 study from the RAND corporation.
Family dynamics have an outsized impact on bank customers’ financial wellbeing, but it’s rare for banks to focus on understanding customers through the lens of familial relationships. Institutions who decide to focus on this aspect of their customers' lives could find their way into a blue ocean of opportunities to deepen and broaden the customer relationship.
We see an example of this opportunity in the bankers who serve ultra high net worth individuals and families (UHNW). The assets of these individuals are complex enough to require more familial involvement in financial planning and decision making. UHNW bankers are often called upon to navigate which family members should be invited to what meeting. They “grandfather” young adult children of their clients into the same services their parents are a part of. They have opportunities to start conversations about succession and control of the family business, as many UHNW families own closely-held businesses. By managing the family’s relationship with the bank and interactions between one another, UHNW bankers play a deeper role in their customers’ financial lives beyond dollars and cents. If institutions could standardize or productize some of the processes UHNW bankers employ, might it be possible to scale this level of service to more customers?
Outside the context of advisory services for UHNW individuals, bankers don’t often examine customer relationships through the lens of the family unit. This is a missed opportunity.
Viewing the customer relationship through a familial lens is important because ignoring these dynamics can create leakage in the intergenerational customer pipeline. Banks who don’t start speaking to the differences between generations and helping to foster family conversations about money risk losing assets as customers pass away if their children don’t have a strong affinity for the bank. This imperative led a group of Alloy Labs Alliance members to convene for a customer discovery session on a segment that rarely receives focused attention: the parents of adult children. This session arose from insights generated from a prior intergenerational (co)Lab session focused on adults and their own senior parents. The particular issues have both some commonalities and some unique differences, but the overall implications were clear: customers have pain points in dealing with financial matters with family members.
Opportunities to explore
The best opportunities for differentiation will transcend the day-to-day pain points banks experience around intergenerational issues such as account permissions or entitlements. The best opportunities will open doors that enable banks to deepen relationships in meaningful ways, instead of focusing on blocking and tackling.
In the Customer Discovery (co)Lab, bankers participated in an empathy mapping exercise to identify some of the issues parents of adult children may be faced with. They looked at the activities these customers are engaged in; going deeper, they discussed the relationship dynamics and cultural differences between the parents and their millennial offspring. This exploration raised the following questions:
Is there a way to capture some of the customs and standards afforded to UHNW individuals in more formal tools or processes? Could more formal tools or processes be scaled to serve the mass affluent? What about applications for the average family?
How can we build a structure for managing familial relationships that delineates what planning activities need to be done together, as a family unit, versus individually or within subsets of the family?
The financial realities and goals of young adults are often radically different from that of their parents. How might the bank serve as a bridge between generations? Might they play a sort of “family money psychologist,” role, acting as a neutral third party and translating the financial goals and realities among the members of each generation in a family?
Should banks be exploring new products that would enable parents to set aside special pools of money for their children similar to how 529 plans provide for educational benefits?
Is there a way to “keep score” within families to ensure equity among children and help reinforce informal covenants?
When do young adults want to be brought into the conversation about their parents’ finances? Once they’re in the conversation, how can we shift to other topics of interest to them?
Obtaining information is easy these days, but sorting out which topics to focus on is harder. How might we offer financial education that guides young adults to focus on the most impactful financial decisions?
Some of these questions could be answered with processes, while others could result in some piece of technology. But potential outcomes can’t be illuminated without further examination and testing.
Before embarking on that next phase of customer discovery, it’s useful to conduct a brief survey of the existing landscape for intergenerational financial services. Consider the following solutions available in the market today:
Silverbills provides bill management services that cater to adults caring for their aging parents. Silverbills monitors all a customer’s bills for fraud and errors, and manages billpay through a customer’s existing bank account. No computers are needed to maintain a Silverbills account, and copies of bills can be sent to the company electronically or in paper form.
Wallit is a cash-back budgeting app specifically designed for families. When customers spend money or redeem offers at local merchants, they earn rewards. The app enables the creation of multiple savings goals, and the ability to manage a family budget. Wallit also facilitates transactions such as disbursing allowances.
Greenlight is a debit card designed just for kids. Parents can transfer funds to their kids on the cards and monitor their children's purchases, creating opportunities to teach them responsible financial habits.
True Link Financial helps families limit financial transactions for seniors, people with disabilities and family members who are in recovery from addiction by customizing card controls to manage cash withdrawals, payments to scam charities, unauthorized wires and other activities.
Golden partners with banks and other financial services companies to provide estate planning, wealth management and a range of other services geared to helping adults manage the finances of senior members of the family. Expense review, billpay and a family document vault also help customers manage their familys’ finances.
While there are myriad products aimed at solving specific problems for young children, aging adults and their caregivers, offerings tailored to the familial relationships between middle-aged people and their young adult offspring are lacking.
What’s more, there is no solution for approaching the ways in which banks can help orchestrate financial decision making across all the generations represented in a family. These deficiencies might present the best opportunities for banks to capitalize on in an effort to retain their clients’ assets, and parlay existing relationships into new ones with members of the next generation.
To begin exploring this opportunity, banks may select one of the questions posed above as a starting point for testing the needs of intergenerational clients. Using a process like FIRE, which stands for Fast, Iterative, Responsive, Experiments is one way to proceed. Reach out to jason@ftforge.com if you’d like to train your team on effectively using this method.