Study reveals fear that the next generation may decide to switch advisor
As the great generational wealth transfer gathers pace, will younger Canadians decide to also switch advisors?
That’s the big concern of almost half of Canadian advisors polled as part of a larger global report from Natixis Investment Managers who said they consider the generational transfer of an estimated US$84 trillion over the next 20 years represents an existential risk to their business.
More than half worry they may not retain the assets from spouses and especially from next-gen heirs, as borne out by current stats: Canadian advisors report retaining client relationships 74% of the time when the spouse inherits, but that drops to 45% when their clients’ children inherit.
Growing and retaining their client base is also front of mind in the next few years, with advisors targeting average AUM growth of 11% and picking up 18 new clients per year, although this is well below the 34 new clients expected by global peers.
More than half of Canadian advisors said that they recognise the need to address growing demand for financial planning services and to differentiate their offering to stay ahead, such as offering trust services (62%), personalized services such as networking services (51%) and financial boot camps for the next generation (40%) among ways they can retain assets.
Relationship building it cited as the most important priority for retaining clients and this includes engaging with the next generation.
While only 12% of advisors said they are dedicating time to prospecting for new clients, 97% of those that are stated that they are placing the highest priority on attracting clients in their 50s and 60s who are nearing retirement, while 52% are targeting those in their peak earning years (35-50 years old).
Meanwhile, only 19% of advisors place a high priority on prospecting for clients between the ages of 18 and 35, despite them making up the largest segment of the Canada population.
“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.”
The report also found that advisors are also looking at ways to improve efficiency with the use of model portfolios one of the key tools.
