Marketing to the High Net Worth Next Generation

Money KGlobal Head, Next GenerationCiti Private Bank

Marketing to the High Net Worth Next Generation

April 2014

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The Wealth Pyramid

Ultra High Net Worth

>$30 million in net worth

High Net Worth $1 million - $30 million in net

worth

Affluent >$1 million in net worth

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• Foster strong relationships and build a business pipeline with scions of our clients

• Enhance their knowledge and capabilities in global finance and wealth management

• Introduce long-term financial planning for them and their families

• Help them build networks and partnership with their peers

• Assist with their business and entrepreneurial ventures

• Enable successful generational transitions to prolong their family legacies

The Next Gen Initiative in Citi

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Unprecedented Wealth Creation

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12 million HNWIs ….

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….. representing $46.2 trillion in wealth

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US continues to lead the pack

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About 110,000 (1%) own $16.3 trillion (35%) of that wealth

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Next Generation A Global, Social, Digital Race

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Generationally speaking …..

Baby-Boomers (Post-War till 1964)

Gen Y & Millennials 1977 - 1992

Gen X Born 1965 - 1976

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What drives your savings and investment decisions?

Friends/Peers

Family Office

Banker Advice

Own Decisions

Parental Advice 35%

27%

18%

13%

8%

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What has been most beneficial from the Next Gen program?

Networking with peers

Learning Inv. & Wealth M.

Learning non-finance topics

Meeting Senior Mgmt

Social Activities

55%

32%

10%

1%

1%

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What do you value most in your private banking relationships?

2

12

25

29

33

34

45

64

Other?

Branch Availability

Mobile/Online Banking

Range of Prod/Service

Brand / Reputation

Pricing

Banker Access

Investment Advice

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Social Media - Usage

57

31

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10

4

3

1

1

15

11

23

8

6

5

1

2

1

6

6

2

4

1

2

10

12

14

12

8

9

5

Facebook

Instagram

LinkedIn

Twitter

Google

Pinterest

Foursquare

Myspace

Daily Weekly Monthly Rarely

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How will you keep in touch with your peers?

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31

40

44

71

GenGlobalNetwork

In person

Phone

Email

Other social media / networks

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What will drive your decision when choosing a private bank?

74

49

38

28

21

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Quality of Banker

Global Access & Network

Brand / Reputation of Bank

Continuing with Parents' Bank

Peer Recomendations

Other?

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• Peer influence is dominant

• Digital engagement is critical (and security is paramount)

• Trusted advisor is irreplaceable

Key Takeaways

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Unprecedented Wealth Transfer

Over the next 50 years, $41 trillion in wealth will transfer hands from one generation to another

Source: PWC, 2013

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Different Expectations, Behaviors, Aspirations

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Banks are not new to the digital world

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• Web services

• Automated service systems eg kiosks

• Electronic banking

• Mobile payments

• Online brokerage

• Electronic wallet for loyalty cards

In consumer banking ……

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Wealth management sector sluggish in being digital

1. 60 percent of all retail banking transactions are now done online – Booz & Company

2. In wealth management and private banking, the transformation has been slower. Only 22 of 50 (44%) private banks had optimized their websites to integrate smartphone applications - Booz & Company

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Investment in technology continues unabated ….

O&T 40%

Front Office 30%

Middle Office 30%

IT spending in financial services globally will exceed $430 billion in 2014 and go beyond a whopping $500 billion by 2020. (Source: American Banker)

Distribution of Personnel in a Universal Bank

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Ages 50 and under are pro-digital

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US and Asia high on digital ….

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Tablets more popular than smartphones ….

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• More spend on innovation: Some 70 per cent of banks said they will expand spending on innovation, with the mobile and online channels seen as the most important delivery channels to invest in. (Source: Computer Weekly)

• Smartphones & Tablets: Some 93 per cent of banks will offer mobile payment services and 89 per cent plan to offer bespoke tablet banking applications to customers in the next three years. (Source: ComputerWeekly)

• Digital 1st; Branch 2nd : By 2015, digital banking will overtake branch services as the main way clients interact with their bank, according to a recent PWC study.

• Willingness to Pay: PWC surveyed more than 3,000 banking clients in nine developed and emerging markets. Most respondents said they would pay a monthly fee of up to US$15.30 for digital banking services that offer convenience and value.

• High Social Media Influence: 70 per cent of high net worth individuals have used information found on social media to either change advisors or investment decisions – db Corporate Social Platform

Digital trends ….

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However, Greater Complexity & Regulation in Financial Services

1. Taxation & Transparency

2. Client Protection & Suitability

Foreign Accounts Tax Compliance Act

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Digitization – Benefits for Clients For Client:

1. Instant high-speed, real-time access to research, market data and advice

2. Communicate “live” with bankers and investment counsellors - anytime, anywhere

3. Execute on-line transactions

4. Review and manage portfolio

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Digitization – Benefits for the Wealth Manager

For the Wealth Manager:

1. Enhance value proposition and drive business

2. Build a 360 degree view of client’s assets and behavioral profiles

3. Streamline back-office operations, eliminate manual activities

4. Better tracking and management of client interactions for compliance and audit purposes

5. Greater efficiency, productivity, savings, profitability – lower cost-income ratios

6. Business sustainability - future clients expect digital experiences / relationships

7. Modernizes the brand and its appeal to Next Generation customers

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Digitization also poses risks

1. Data thefts

2. Confidentiality breaches

3. Hacker attacks

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Next Gen want to be inspired ….

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Thematic, Bespoke, Proactive, Personal ….

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Another example …

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1. “DIGITAL BANKER” : The private banker plays a critical role – what digital innovations and behaviors should be adopted to be better bankers?

2. WHAT’S UPCOMING: What new technologies and new opportunities for digital banking?

3. OPERATIONAL EXCELLENCE: Big Data and Cloud – how can they be better leveraged for operational excellence?

4. SECURITY: Security, privacy and confidentiality are sacrosanct in private banking. What new risks and threats are there to digital banking?

5. SOCIAL MEDIA ANALYTICS: What can we learn about our future clients’ expectations and behaviors from the social media? How can we extract more intelligence and analytics?

6. SOCIAL MEDIA MARKETING: How can private banks use social media channels more aggressively for client interaction and acquisition? Or should they not?

Some Thoughts

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Citi Private Bank is a business of Citigroup Inc. (“Citigroup”), which provides its clients access to a broad array of products and services available through bank and non-bank affiliates of Citigroup. Not all products and services are provided by all affiliates or are available at all locations. In the U.S., brokerage products and services are provided by Citigroup Global Markets Inc. (“CGMI”), member SIPC. Accounts carried by Pershing LLC, member FINRA, NYSE, SIPC. CGMI and Citibank, N.A are affiliated companies under the common control of Citigroup. Outside the U.S., brokerage products and services are provided by other Citigroup affiliates. Investment Management services (including portfolio management) are available through CGMI, Citibank, N.A. and other affiliated advisory businesses. All credit products are subject to credit approval. Citigroup Inc and its affiliates do not provide tax or legal advice. Citi and Citi with Arc Design are registered service marks of Citigroup Inc. or its affiliates. © 2014 Citigroup Inc., All Rights Reserved. Citibank, N.A. Member FDIC

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