Rise of the modern affluent millennial
This article was written by Vivien Shiao and first published in The Business Times on 22 Sep 2021.
Contrary to popular belief, not all wealthy young people come from rich families. Today, a growing number have become affluent through entrepreneurship, forging careers as members of middle to upper management in corporations, and even by being early investors in cryptocurrencies, which skyrocketed in recent years.
Just as this group of "modern affluent" millennials has taken different paths to their wealth, there is also no one-size-fits-all approach when it comes to wealth management, says Steven Ong, head of DBS Treasures Singapore.
"What's most important is to take a disciplined and long-term approach, and to access investments that are customised to meet your specific risk-return objectives," he adds.
For example, some of DBS' clients hold property-heavy portfolios that rely on rental income and property appreciation for returns, while others focus on speculative trades by investing in equity markets or having equity-focused structured product portfolios.
Regardless, Mr Ong points out that these modern affluent individuals still share similar responsibilities in life such as looking after parents, making marriage plans, having young children and planning for their future.
"All while having busy working schedules, which often leaves them time-starved and too drained to spend much time monitoring and staying atop their finances," he says.
This group is also likely to be digital natives who are used to being engaged digitally, preferring to have information on demand, along with a simple execution process.
As such, these millennials tend to be self-directed when it comes to investing or managing their wealth.
That being said, Mr Ong points out that traditional advisory services still play a role for these individuals as it complements self-directed platforms and research reports.
This is especially so when it comes to more sophisticated investments like structured products, making the wealth journey more complete, he says.
With Covid-19 upending normalcy and prompting a rethink of life, it is inevitable that individuals re-evaluate their views on wealth management.
Given the severe market turmoil and witnessing how transient life can be, the pandemic served as a reminder of having a diversified portfolio that is strongly positioned for long-term resilience amid a changing world, says Mr Ong.
"Beyond investing in the potential winners and avoiding the losers in a post-Covid world, they should also look at capturing emerging growth possibilities," he says.
This is where exploring secular themed investments, such as those designed to navigate megatrends such as digital disruption and sustainability can come into play.
Furthermore, with global interest rates likely to remain low in the short to medium term, the need to generate consistent income from investments continues to be a priority, providing cashflow for clients during these times.
Mr Ong has noted the growing take-up of this wealth management approach among DBS clients, amid rising awareness to build resilient portfolios for the long term.
The bank is seeing increased participation in equity markets through direct investments in cash equities, equity-linked structured products, and continued portfolio diversification through fund solutions.
This comes as the modern affluent investor tends to be savvy as they have been taking advantage of market opportunities like the Covid-induced selloffs in global equity markets over a year ago which, in turn, have resulted in them having increased exposure to cash equities and equity-linked structured products.
"Their actions also exhibit an understanding of the latest secular investment themes and benefits of investing in sectors of the global economy that will experience strong growth in the coming years," he says.
For these modern affluent individuals, one key piece of advice he has for their portfolio management is diversification.
Holding a variety of assets reduces overall risk and the possibility that a single security or asset class will drag down performance.
Meanwhile, the right mix of assets - for example, equities, bonds, alternatives and cash - can help to maximise the risk-reward from investments, notes Mr Ong.
While the modern affluent millennials might not be considered under-served in the traditional sense as they mostly meet the requirements for wealth management services here, he believes that there is room for change on this front.
He observes that many among the modern affluent are digital natives who are used to making decisions through digital platforms, including investment decisions where they might prefer to do their own reading on particular investment products before seeking advice from wealth advisers.
Yet, they're also likely stretched for time and unable to plough through multiple research reports or keep abreast of the markets at all times as they need to juggle multiple responsibilities, says Mr Ong.
Some of them could also be relatively new to their current stage of wealth and may be unsure of how best they can grow and manage it.
At DBS Treasures, the bank seeks to address these gaps for clients by blending tech with its financial expertise, meeting these digitally savvy investors where they are.
Leveraging the bank's digital capabilities and infrastructure, clients are provided with "intelligent" digital nudges that automatically alert them to timely opportunities worth their attention.
These clients also have easy access to quality, up-to-date and digestible insights at their fingertips, says Mr Ong.
With this knowledge, they will have all they need to make appropriate investment decisions to meet their wealth management aims.
In addition, DBS' wealth advisers are also on hand to advise them on the suite of products they have access to, and how they can enhance existing portfolios to make their assets work harder, he adds.
Relationship managers at DBS Treasures, which caters to Accredited Investors with investible assets of S$350,000, can provide advice that is backed by data and predictive analytics, with the capabilities to boost clients' portfolios with bespoke investment solutions.
As wealth management evolves over the years, investment products are becoming "more commoditised than before", he says.
With so many different products to choose from, advisory is key to ensure that clients are better informed to make the right investment decisions to judiciously grow their portfolio.
"It is all about making their investment journey as seamless as possible while maintaining the human touch of a wealth adviser," says Mr Ong.
"At the heart of it, wealth management is human-led - it is all about relationships."
Get in touch to accelerate your wealth with DBS Treasures
Or opt in with digibanking if you are an existing client.