Time to Start Wooing the Next Generation of Investors



Savvy broker/dealers need to start understanding how to win the next generation of investors, an industry analyst said.



 In the financial services industry, young is relative. Typically it means middle-aged investors between the age of 35 and 55. Investors in this age range size up surprisingly well against their older counterparts in terms of addressable retirement savings and overall wealth. As a group, they control $10.2 trillion in investable assets and 659,000 are considered affluent or wealthier. This compares with $16.6 trillion controlled by households who are 56 years of age or older, of which 1.5 million households are considered affluent or wealthier, reports Cerulli Associates. 

Younger investors are excellent targets for asset managers and distributors, but many have not yet hired their first adviser. On average, their wealth is still below that of their older peers, and some distributors may see them as less attractive. But the choices these investors make will determine which models of advice survive and which will struggle to adapt, according Cerulli Associates research.

While still a far-off concern, firms should begin thinking about the next generation of wealth. They should consider the average age of their client base and look for changes over time.

“Those firms who intend to wait until the next generation of wealth ages and build assets may face greater competition in acquiring clients,” says Katharine Wolf, associate director at Cerulli Associates. “Other advice providers may have already acquired the next generation of clients and, if those providers can keep these clients happy, the clients may have no impetus to seek another provider.”


Firms that take a wait-and-steal-wealthy-clients approach will face greater competition, as other providers add more advice services. Direct providers, for example, have retooled their advice services over the last few years. These firms have an advantage in that advice-seeking investors often reach out to them on the investor's pre-existing relationships via a 401(k) plan or smaller retail account. While they won't necessarily steal clients away from traditional adviser channels, direct firms are becoming better at retaining clients who may otherwise seek outside advice.

"By offering advice, direct firms may slow the stream of clients who seek a traditional adviser in the first place, Wolf says. "Direct firms have added managed account programs and have been promoting them for clients who desire ongoing advice. In short, direct firms are getting better at identifying, targeting, and retaining advice-seeking clients.”