In Practice May 9, 2018

RIAs Predict 41% of New Clients Will Be Gen X, Millennials by 2023

This will mean shifting their current focus from Baby Boomers, TD Ameritrade learned in a survey. 

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Forty-two percent of registered investment advisers (RIAs) say they are changing their marketing and networking to attract younger clients, according to TD Ameritrade Institutional’s 2018 RIA Sentiment Survey. They say that today, Baby Boomers comprise 46% of their client base, but five years from now, in 2023, they expect that to drop to 43%—and 41% of their new clients will be Gen X and Millennials. Additionally, seniors will fall from 23% to 14% of clients.

“In just five years, RIAs expect 41% of their clients to be Gen Xers or Millennials,” says Kate Healy, managing director, Generation Next, at TD Ameritrade Institutional. “This should be a wake-up call to those who think that Next Gen wealth is literally still a generation away. Change is coming, which means advisers need to rethink their approach to finding both talent and clients in order to continue on their growth trajectory.”

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To attract Next Gen clients, nearly 40% of RIAs are advising 401(k) plan participants. Forty-seven percent are re-evaluating how they charge for their services, whether that is a flat fee for financial planning and coaching (33%) or adjusting pricing and fees in some other way (14%). Additionally, more than 20% of RIAs are lowering asset minimums.

Thirty percent are hiring younger advisers, and 24% are hiring college interns. Twenty percent plan to hire and train mid-career changers, providing an opportunity for women re-entering the workforce, and professionals from other industries and the military.

Twenty-five percent said succession planning or hiring talent is the challenge that will have the greatest impact on their firm in 2018, and 22% said the shortage of younger advisers is a threat to their growth.

TD Ameritrade also learned that many RIAs are ignoring the tremendous opportunity of the Next Gen, with 44% not taking any steps to build a new talent pipeline. Twenty-three percent are not doing anything to attract younger clients.

“Advisers who are not planning now to ensure the longevity of their firms risk being left behind,” Healy says. “Firms that are actively taking steps now to manage for client needs down the road may be better prepared in terms of talent, technology and, of course, clients.”

MaritzCX conducted the telephone survey of 300 RIAs managing an average of $161 million in assets last November and December.
Data & Research May 9, 2018

Millennials Learned to Save, But Not How to Invest

Half of Millennials expect to retire with financial stability, although most admit they do not know how to successfully invest, PNC Investments found in a survey.

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Millennials, now the largest group in the workforce, fear they are not saving enough for the future, according to PNC Investments’ Millennials & Investing Survey.

More than half say they do not have an emergency fund. Two-thirds say their parents encouraged them to save, but only half say their families modeled good money management, and even fewer say their parents showed them ways to grow wealth beyond having a job.

“It’s no secret that our attitudes toward money are likely influenced by how much financial education we received as children and the types of role models we have in our immediate family,” says Rich Ramassini, senior vice president and director of strategy and sales performance at PNC Investments. “However, this survey funds that Millennials’ financial education largely skewed toward savings instead of investing. When it comes to building wealth over the long term, investing is a critical component of a portfolio and one that should not be ignored.”

Younger Millennials, those who were in high school during the Great Recession of 2008, say their family modeled good money management, slightly more so that older Millennials who were in college or in the workforce during that period. Seventy-nine percent of those between the ages of 25 and 29 say their parents talked to them about managing finances, whereas only 70% of Millennials between the ages of 30 and 35 say the same.

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Half of Millennials expect to retire with financial stability, although most admit they do not know how to successfully invest.

“As this generation matures and acquires more wealth, it’s absolutely critical that they devise a comprehensive financial plan, which consists of an emergency fund, a mix of savings and investing and an intimate understanding of their future goals,” Ramassini adds.

Chadwick Martin Bailey designed the online survey, which was conducted in January among Millennials between the ages of 21 to 35 with investable assets of $5,000 or more or a 401(k) or 403(b) plan and at least $1,000 in investable assets.

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