Advisors courting clients in the 60s and 70s may have lost sight of a real opportunity to grow their book of business, according to new research, tossing conventional thinking on its ear.
Advisors courting clients in the 60s and 70s may have lost sight of a real opportunity to grow their book of business, according to new research, tossing conventional thinking on its ear.
Advisors typically target older investors, but the new report from PriceMetrix encourages advisors to target younger clients because they will grow faster and give advisors a more balanced book of business.
“Which book would you rather have, an aging group of clients or a younger, more dynamic mix?” said Doug Trott, President and CEO of PriceMetrix, in the report. “Yet, today, most firms will treat and reward these two books the same.”
An advisor whose book includes a significant portion of clients under 45 will grow an average of 14.1 per cent a year with an annual revenue of $890,000 compared to an advisors with an older book, who has a current revenue of $810,000 and an expected growth rate of 7.7 per cent per year, according to the report.
Advisors have said that working with younger clients doesn’t pay much dividends because most of them have no assets; a financial plan makes more sense, some say.
However, with SRI mutual funds becoming more attractive among a younger pool of investors looking to invest, advisors would be wise to capitalize on the opportunities to attract younger talent.
“Advisors assume that when you’re talking about young clients, you’re referring to people who are in their 20s and 30s but clients in their 40s and 50s represent a generation untapped,” said Pat Kennedy, co-founder of PriceMetrix.
“That’s where most people seriously begin to save for retirement and advisors need to be wise to realize that that’s where the money is long-term.”
According to the report, the average client is 62 while the average advisor is 52, however 25 per cent of them are nearing the typical retirement age, setting the industry up for a “second material wealth transfer.”
“Advisors should be asking how the age of their clients is affecting their growth and production while firms should be asking whether they have the right mix of advisors in terms of age and whether they are properly incentivizing advisors to target younger clients,” as quoted in the report.
The research also finds that financial services firms must allow advisors some leeway in terms of investment minimums and production requirements so advisors can attract those younger clients.
“The demographic lesson here is clear,” Trott said. “In order to maintain growth, advisors and firms have to understand and take into consideration the age of both advisors and clients when they’re considering the proper mix of their businesses.”
Advisors typically target older investors, but the new report from PriceMetrix encourages advisors to target younger clients because they will grow faster and give advisors a more balanced book of business.
“Which book would you rather have, an aging group of clients or a younger, more dynamic mix?” said Doug Trott, President and CEO of PriceMetrix, in the report. “Yet, today, most firms will treat and reward these two books the same.”
An advisor whose book includes a significant portion of clients under 45 will grow an average of 14.1 per cent a year with an annual revenue of $890,000 compared to an advisors with an older book, who has a current revenue of $810,000 and an expected growth rate of 7.7 per cent per year, according to the report.
Advisors have said that working with younger clients doesn’t pay much dividends because most of them have no assets; a financial plan makes more sense, some say.
However, with SRI mutual funds becoming more attractive among a younger pool of investors looking to invest, advisors would be wise to capitalize on the opportunities to attract younger talent.
“Advisors assume that when you’re talking about young clients, you’re referring to people who are in their 20s and 30s but clients in their 40s and 50s represent a generation untapped,” said Pat Kennedy, co-founder of PriceMetrix.
“That’s where most people seriously begin to save for retirement and advisors need to be wise to realize that that’s where the money is long-term.”
According to the report, the average client is 62 while the average advisor is 52, however 25 per cent of them are nearing the typical retirement age, setting the industry up for a “second material wealth transfer.”
“Advisors should be asking how the age of their clients is affecting their growth and production while firms should be asking whether they have the right mix of advisors in terms of age and whether they are properly incentivizing advisors to target younger clients,” as quoted in the report.
The research also finds that financial services firms must allow advisors some leeway in terms of investment minimums and production requirements so advisors can attract those younger clients.
“The demographic lesson here is clear,” Trott said. “In order to maintain growth, advisors and firms have to understand and take into consideration the age of both advisors and clients when they’re considering the proper mix of their businesses.”
