Survey data released by D.A. Davidson & Co.’s Individual Investor Group shows more than half of financial advisers are still primarily going after new clients who are Baby Boomers—although the majority is unlikely to hold out that much longer.
According to D.A. Davidson, about six in 10 (59%) advisers are “most focused on attracting Baby Boomers (age 52 to 70) as future clients.” More than half (53%) of these respondents, in turn, believe that Baby Boomers are the “most attractive generation because of the advice needed based on their current life stage.”
Advisers identified a variety of familiar services they would like to deliver to more Baby Boomer clients, from traditional investment portfolio support to holistic financial wellness consulting, including guidance on Social Security claiming strategies, budgeting, structuring income, etc. Many expect challenges to some of these offerings related to the Department of Labor’s (DOL) new fiduciary rule, but D.A. Davidson executives feel the industry has more than enough brainpower and resources to solve short-term business challenges.
Andrew Crowell, vice chairman of D.A. Davidson & Co.’s Individual Investor Group, tells PLANADVISER the findings also underscore a significant opportunity for advisers to engage younger clients. For many advisers this will represent first targeting Generation X clients who are well-established in their own careers and who are likely entering their peak earning years—but the firm also encourages advisers to think longer-term, about the earning power Millennials are already starting to build in the labor force.
“Millennials are very rapidly becoming the largest generation in the workforce, and many of them are very closely plugged into their Baby Boomer parents’ own finances,” Crowell explains. “Having gone through the financial crises essentially right at the start of their working careers, and with the likelihood of a large amount of wealth transferring from Baby Boomers to Millennials, it is certainly the time to start forming a presence among young people in the workforce.”
NEXT: Communication challenges
The question is, of course, when does a Millennial shift from a prospective future client to someone you’re targeting to have as a client today? From D.A. Davidson’s perspective, Crowell says the formula that seems to work best amid real regulatory reform and difficult markets is “essentially to leave this decision about the timing of starting a formal relationship up to the client.”
“Practically, this means that we have to be using channels like social media and getting into the workplace to create some awareness of who we are and what we do,” Crowell adds. “We need to start making young people aware of the value of financial advice, especially when it is sought out early so that a good long-term plan can be put in place. If we do a good job on all of this we will naturally invite Generation X and Millennials in at the right time.”
While the appeal of winning new Baby Boomer clients is fairly obvious, it’s also a pretty simple formula that makes Generation X and Millennials a sensible target today.
“We have a tremendous opportunity to advise Gen Xers and Millennials for decades to come,” explains Michael Purpura, president of D.A. Davidson & Co.’s Individual Investor Group. Those advisory firms who move early to serve these generations have a chance to win literally decades of loyalty, and they will be driven to stay in tune with the latest technology, product developments, communication strategies—even business models. In the end it's healthy for the client and the adviser.
The survey data shows roughly one-third (37%) of advisers are most looking to attract Gen Xers (ages 34 to 52), and “only 2% say they are primarily focused on attracting Millennials (ages 18 to 33).”
Roughly half (52%) of those looking to attract Gen Xers as future clients say that this generation is most attractive because of their future earnings potential; and one-third (35%) say that it is the advice needed based on life stage that makes them appealing. “Notably, 62% of advisers surveyed believe that younger generations are not working with advisers because they think they do not have enough investable assets,” Purpura concludes.