We’ve said it before and we’ll say it again—control the 401(k) during the accumulation phase, and advisors have an exponentially greater chance of controlling the rollover and distribution phases. It means “getting them while they’re young,” and holistic planning, a fiduciary business model and the advisor experience are keys.
A new study from Jefferson National finds that RIAs are driving growth and profitability by attracting new clients, and the most successful are focused on an emerging market of next-generation investors.
Year over year the pursuit of profitability is advisors’ single most important practice management issue, and adding new clients is the top driver. The most successful advisors are focusing on the next generation of younger investors. High-AUM advisors who manage $250 million or more say Gen-Xers (age 36 – 51) are their primary target, and high earning advisors who earn personal income of $500,000 or more say Millennials (age 18 – 35) are their primary target.
The Deloitte Center for Financial Services projects that Gen Xers’ net worth is projected to increase from $11 trillion in 2015 to $37 trillion by 2030. Yet less than half (42 percent) currently work with a financial advisor. Likewise, Millennials’ net worth is projected to increase from $4 trillion in 2015 to $20 trillion by 2030, according to Deloitte. And, just slightly more than half (52 percent) of Millennials are currently working with a financial advisor.
When younger investors are asked what matters most for choosing an advisor, clear priorities emerge. Every generation of investor says experience matters, while many also value advisors who put their clients’ best interests first.
When asked to name top priorities for choosing to work with an advisor, Gen X investors are more likely to say years of experience, personalized advice for a holistic financial picture and use a fee-based fiduciary standard, instead of a commission-based sales model.
Millennial investors are more likely to say reducing fees for younger clients, years of experience and socially responsible investing, closely followed by personalized advice for a holistic financial picture and a fee-based fiduciary standard, instead of a commission-based sales model.
Yet, when asked to name their top three priorities to attract the next generation of investors, advisors cite working with a client’s family and children, increased use of social media and increased use of mobile technology. By neglecting to address younger investors’ top priorities—including holistic planning, a fiduciary standard, lowering fees and socially responsible investing—advisors are missing an important opportunity to connect and build trust with a growing market that is on the path to earning more, building more wealth, and requiring ever more sophisticated financial solutions over time.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
