More than 4 in 10 (41%) of U.S. advisors expressed that the Great Wealth Transfer, in which $84 trillion will pass from one generation to the next over the next 20 years, presents an existential threat to their business.
That’s a key finding from the Natixis Center for Investor Insight’s latest survey of U.S. financial advisors, highlighting key challenges, client concerns, and strategies for the future. The Natixis Investment Managers (IM) 2024 Survey of Financial Professionals, published today, surveyed 300 U.S. financial advisors as part of a larger global survey of 2,700 financial professionals across 20 countries.
Nearly a third of advisors (30%) are worried they will not retain assets from clients’ spouses or next-generation heirs during the Great Wealth Transfer. To combat the threat, the survey found advisors are looking to build relationships with clients and their family members, improve their efficiency and service offerings, and find ways to be more dedicated to prospecting for new clients.
“Advisors have had to demonstrate their flexibility and ability to navigate historically challenging market dynamics in recent years. Now, they need to flex their strategies even more to appeal to the next generation of investors,” said David Goodsell, Executive Director of the Natixis Center for Investor Insight. “Finding more time to deepen relationships with clients and financial planning service offerings will be crucial to the success of advisors and their businesses in the long run.”
Retaining vs. Prospecting Amid Great Wealth Transfer
In anticipation of the Great Wealth Transfer, financial advisors are relying on building relationships with current clients but realize the need to prospect for new clients as well. U.S. advisors report retaining client relationships 78% of the time when the spouse inherits, but that drops to 58% when their clients’ children inherit. Further, almost a quarter (22%) advisors report that they’ve lost significant assets through generational attrition.
To retain assets, 92% of advisors say relationship-building is the No. 1 course of action that helps. To build relationships with the next generation of clients, 85% say they are regularly discussing family wealth planning with existing clients and 87% extend family wealth planning discussions to family members. Advisors also say offering services such as ancillary services such as trust services (55%), personalized services such as networking services (39%) and unified managed accounts (21%) are ways they can retain assets.
On acquiring assets, advisors realize the need to prospect for new clients but currently dedicate only 8% of time to it. Almost half (46%) of advisors are prioritizing client segmentation as an efficient way to improve their prospecting efforts.
Most (96%) place the highest priority on pre-retirees, or people between the ages of 50 and 60, followed by those between the ages of 60 and 65 who are at or just entering retirement (88%). Close to half (46%) of advisors are also increasingly looking at older accumulators between the ages of 35 and 50, who are in their peak earning years and likely in need of comprehensive financial services to address multiple financial goals such as saving for retirement, funding education, and managing debt.
Given the market environment and generational transfer of wealth underway, advisors may be missing opportunities to reach the oldest and youngest group of potential clients.
- Over half of (56%) of U.S. financial advisors are focused on post-retirees, many of whom are drawing down versus accumulating assets but who still need robust financial planning and advice to protect, use and pass on their assets.
- Only 14% place a high priority on prospecting for clients between the ages of 18 and 35, members of Generations Y and Z, who represent the largest segment of the U.S. population.
To improve their prospecting strategies, about half of advisors are looking towards team-based approaches that includes a member dedicated to prospecting. Similarly, almost half (43%) of advisors are leveraging social media strategies for prospecting and 21% find promise in leveraging future AI-powered prospecting tools.
In addition to the risks of the Great Wealth Transfer, the survey found the other long-term pressures advisors face include:
- The economic impact of the U.S. election and public debt: While 88% of advisors hear concerns from clients about the U.S. election impacting their investments, 85% see underlying economic fundamentals as more important than election results. Ultimately, policy will matter long-term as 68% of advisors report public debt as the top economic risk.
- Growing demand for financial planning services: Advisors currently spend 46% of their time meeting with or managing clients, namely, keeping them invested and helping them to avoid timing the market. In the long run, they’ll need to address a growing demand for financial planning services, which 62% of US advisors believe differentiates their practice.
Natixis Investment Manager’s global report on the findings of its 2024 survey of Financial Advisors can be found here: https://www.im.natixis.com/en-us/insights/investor-sentiment/2024/financial-professionals-report
SEE ALSO:
• Millennials Set to Inherit Majority of Assets in Great Wealth Transfer
• Gen Xers Doubt Their Ability to Retire Securely