As boomers move into the decumulation phase, wealth firms must cater to a new generation’s needs
For financial advisors, planning for the future is par for the course. Usually that means helping their current clients achieve long-term goals — but as a new study shows, that means setting their sights on a new group of clients.
A new survey from TD Ameritrade Institutional found that financial advisors expect that millennial and Gen-X individuals will increase from 30% of their clients today to 41% in five years, reported WealthManagement.com. By contrast, baby boomers and seniors will fall from 46% to 43% of clients, and from 23% to 14%, respectively.
“When you think about this next generation, they’re the accumulators now,” Kate Healy, managing director of Generation Next, TD Ameritrade Institutional, told the site. “Many advisors are … seeing a lot of their clients be in that decumulation mode, and for their firms to grow, they really want to start to cater to the accumulators.”
Around a quarter of those surveyed said they had no strategy in place to compensate for the assets they stand to lose as older clients retire. On the other hand, 47% of advisors are tweaking their fee structure to lure next-gen clients: 33% are offering a flat fee for financial planning or coaching, 23% are lowering asset minimums, and 14% are adjusting their pricing.
According to Healy, millennials and Gen Xers are willing to pay as much as older generations — not necessarily for asset management, but for full-on financial planning. “[Advisors] need to make sure they’re able to counsel clients on more than just investments,” she said. “They need to have debt management to talk through student loan debt because that’s a big piece of a millennial’s portfolio.”
Aside from student debt, millennials are seeking guidance on life milestones like whether to take a certain job, return to school, or whether they should buy or rent a house. Issues like tax planning and managing inheritances should also be considered under ancillary services.
Healy said advisory firms should consider another factor in sustaining their practice: hiring new talent. She suggested that firms struggling to get new recruits should think about hiring younger talent from places other than financial-planning programs. Career changers, women re-entering the workforce, and people in ancillary degree programs like education and psychology — those considered as “helping professions” — are also possible candidates, she added.
Among the survey respondents, 30% were hiring younger advisors, 25% were recruiting and training mid-career changes and former military personnel, and 24% were taking on college interns.
