Meet Your 2023 Advisory Clients: Trending Younger

Advisory clients are quickly morphing into those who grew up listening to Run-DMC and watching “Lord of the Rings.”

Yes, clients are getting young – and the transition is happening fast.

By 2023, 41 percent of all clients will be Gen Xers or millennials, up from 30 percent today, according to the TD Ameritrade Institutional 2018 RIA Sentiment Survey.

Meanwhile, baby boomers will comprise 43 percent of advisory clients, down from 46 percent today. Seniors will decline from 23 percent to 14 percent over the same time period, the survey said.

“This should be a wakeup call to those who think that ‘next gen’ wealth is literally still a generation away," said Kate Healy, managing director of Generation Next, TD Ameritrade Institutional. “Change is coming, which means advisors need to rethink their approach to finding both talent and clients.”

Savvy advisors aren’t sleeping on this changing demographic trend. Nearly 40 percent are advising 401(k) plan participants, TD Ameritrade said. Additionally, 47 percent are re-evaluating how they charge for services to better accommodate younger clients.

That could mean introducing flat fees for financial planning and coaching (33 percent) or adjusting pricing and fees in some other way (14 percent), the survey found.

Another 20 percent of RIAs are lowering asset minimums, as advisors are plugging into the fact that younger financial consumers “tend to be in the early stages of wealth accumulation.”

Trending Younger All Around

Thirty percent of RIAs are hiring younger advisors, who offer more commonality with millennials than older money managers. The goal is to be ready to work with younger individuals when they’re ready for serious financial advice.

“We see a pretty common trend (with younger investors),” says Gregory Ostrowski, a wealth manager at Scarborough Capital Management in Annapolis, Md.

As people start investing they often rely on friends, family and coworkers for advice, Ostrowski noted. Or, they'll search the web for ideas and check out the information provided by their workplace and so forth. At that point, the need for an advisor increases significantly.

“At some point, they realize that there's too much money at stake and that market conditions can change rapidly (the 2008 downturn is one example),” he said. “So rather than go it alone they'll engage a financial planner to help.”

Landing younger investors as clients has its own unique challenges, sales experts note.

“Advisors must accept the fact that younger generations no longer want to be sold to,” said Brian Hart, founder and president of Flackable, a national, full-service public relations and digital marketing agency headquartered in Philadelphia. “They want to be engaged, educated and entertained by compelling content on the digital platforms they use daily.”

That means traditional push marketing methods like direct mail and cold calling will continue losing out to inbound strategies like search engine optimization and content marketing, Hart said.

“The most successful advisors will focus on establishing influence, relevancy and credibility through a combination of public relations, digital marketing and content development,” he said.

'A Considerable Advantage'

Independents advisors have the most to gain from this generational shift.

“For many of the same reasons millennials prefer local restaurants and boutique shops over national chains, independent firms with a strong brand and customized approach will hold a considerable advantage if they’re willing to invest the time and resources,” Hart said.

Advisors need to read the tea leaves correctly in accommodating younger client’s deep dependence on technology to help manage their lives.

“Advisors who don't focus on the subtle shift in the way they deliver advice today will be left behind as younger clients seek convenience (through technology) in addition to expertise in an advisory relationship,” said Chris Cosenza, a financial planner with Brookhaven Wealth Management in Brookhaven, Ga.

Unfortunately, the majority of advisors today are older and many are not willing to make the major changes to cater to the younger crowd, he added.

“Social media, blogs, and other forms of digital marketing strategies can help better reach these younger investors but advisors still need to demonstrate they can help solve problems or assist younger investors,” Cosenza added. “I still think that is universal regardless of the client's age.”

The takeaway? Advisors need to get a grip on how the next generation of wealth management clients want to do business.

“Advisors need to prepare themselves for the fact that younger clients are less interested in products and are more fee conscious,” said Ross Riskin, the founder of the American Institute of Certified College Financial Consultants.

“This demographic still desires quality service and wants to work with someone who can guide them in the right direction and act as a true partner rather than acting as their father's stockbroker.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].

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