Will RIAs Need To Become Therapists?

To attract Gen Xers and millennials, RIAs will need to change their marketing strategies and service models – pronto.

But in what direction should RIAs go?

Michael J. Nathanson, CEO of The Colony Group, goes so far as to say RIAs need to go beyond wealth management, tax and estate planning if they want to capture the next generation.

Nathanson isn’t talking just about debt management and cash flows.

He’s talking about RIAs paying attention to emotional wellness, cognitive therapy, stress management, nutrition consulting, medical support and philanthropy – in short, incorporating advice on entire lifestyle changes.

Wealth management traditionalists might deride such "soft stuff,” but for millennials, it’s all very real.

Nathanson isn’t proposing that his advisors bite down hard on the nutrition consulting business, only that his advisors steer clients toward wellness solutions should a young Millennial client want it.

For thousands of RIAs that’s a big change.

“This is hard for advisors to do because they have been doing certain things in certain ways for so long,” he said.

Hard, but not impossible – and coming down the pike in any event.

How Models are Changing

From lowering asset minimums to doing away with AUM fees altogether, service models are changing, according to a TD Ameritrade Institutional survey of 300 RIAs.

• 47 percent of RIAs are looking at new or adjusting pricing models, the survey found.
• More than 20 percent are lowering asset minimums.
• Nearly 40 percent of RIAs are advising 401(k) plan participants.
• RIAs predict 41 percent of their clients will be Gen Xers and millennials five years from now, up from 30 percent today.
• In five years, baby boomers are expected to drop from 46 percent of the client base to 43 percent, and seniors will fall from 23 percent to 14 percent of clients.

“Change is coming, which means advisors need to rethink their approach to finding both talent and clients in order to continue on their growth trajectory,” said Kate Healy, managing director, Generation Next, TD Ameritrade Institutional.

Luring a Community of Talent

Solving the talent equation is what keeps advisors like Heather Robertson Fortner, chief compliance officer and COO of SignatureFD, awake at night.

Fortner talks about offering work/life balance and flex time as tools to recruit younger RIAs.

“As an employer you need to be flexible to provide that or they’ll say I'm not going to work for you,” said Fortner. “We are seeing that in our own talent recruiting so you need to bring that conversation to clients as well.”

Even such flexibility is seen as table stakes for RIAs in search of young talent.

Young advisors weaned on social media and mobile platforms want tools to connect with clients with similar interests and similar values – whether that be a philanthropic pursuit, impact investing, setting up nonprofits, meeting savings goals, maximizing a 401(k), a 529 college savings plan, or tinkering with different advisor fee schedules.

Fortner calls this “value alignment,” and social media platforms make this easier than ever as RIAs take steps to build the next generation talent pipeline.

The survey also found that:

• 30 percent of RIAs are hiring younger advisors
• 24 percent hire college interns
• 25 percent plan to recruit and train midcareer changers and target ex-military.

A relatively high proportion – 44 percent – of RIAs plan on doing nothing, the survey found.

Nothing?

The "do-nothings" don't come as a complete surprise.

“A percentage of the 44 percent will sell their business and they don’t care,” Healy said. “But the large firms see that and they are bringing in the younger advisors.”

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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