Advisors Still Missing an Opportunity With Younger Potential Clients

New research indicates that nearly two-thirds of Millennial and Gen Z investors believe that working with an advisor is key for financial success — yet most advisors still have an older client base.


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Advisors are putting the future value of their business at risk by not engaging with younger investors, according to new research published this week by Fidelity Investments.

With the younger generations set to inherit 57 percent of existing client assets by 2045, advisors continue to miss out on “Gen YZ,” which is defined as those born between 1981 and 2012. The gap represents more than just a missed business opportunity — it’s also a looming vulnerability.

Over the next 25 years, Millennials alone are expected to inherit $27.4 trillion, while members of Gen Z stand to inherit $11.5 trillion, according to Cerulli, a Boston-based research and consulting firm. Yet according to Fidelity’s research, advisors have reached out to only 13 percent of their clients’ adult-age children — a surprisingly small number, since more than 70 percent of heirs are likely to fire or change financial advisors after inheriting wealth from their parents.

Additionally, the majority of Millennial and Gen Z investors feel that they need a financial advisor, but only one in five advisors has an asset-weighted client age under 60.

The results of Fidelity’s research hints at a correlation between a firm’s asset-weighted client age and its average organic growth rate. Firms with an asset-weighted client age lower than 62 have an average organic growth rate of 10 percent. For firms with an asset-weighted client age of 69, for example, organic growth is only 1 percent — and Fidelity estimates that for those firms, as much as 78 percent of assets are at risk. (Comparatively, only 37 percent of assets are at risk for firms with an asset-weighted age lower than 62.)

“Our industry is approaching a transfer of wealth tipping point as younger investors look for an advice model that is different from what worked for their parents and grandparents,” says Anand Sekhar, vice president of practice management and consulting at Fidelity Institutional. “Advisors who don’t adapt to this shift also risk the overall longevity and valuation of their firm.”

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To meet the needs of younger generations, advisors may need to try different tactics than what they’re accustomed to, including changing the way they communicate, how they structure their fees, and the products they offer.

About 67 percent of young investors surveyed by Fidelity expect their advisor to provide services beyond financial advice and investment management, 63 percent believe that advisors should play an important role in providing access to sophisticated investment strategies like alternatives, and 55 percent of young investors believe that aligning investments to their values is more important than getting maximum returns. And yet, advisors routinely underestimate investors desire for ESG and alternatives.

Sekhar says that many advisors worry about damaging the existing relationship when approaching their client’s children, but they also struggle to seem relatable to the next generation of investors when it comes to things like social media and conversations regarding non-traditional assets such as crypto.

Wealth demographics are also changing, women, for example, control more than a third of total U.S household financial assets (more than $10 trillion) and by 2030, they are expected to control much of the $30 trillion in financial assets belonging to baby boomers, according to a 2020 report by McKinsey. Advisor either need to meet these new investors where they are at or hire younger and more diverse advisors to meet their needs, says Sekhar.

Despite the barriers that some advisors need to overcome, younger investors are eager for professional financial help. According to Fidelity, 63 percent of Gen YZ investors believe that working with an advisor is the key to achieving financial success, and 60 percent currently feel a heightened need to engage a financial advisor due to economic uncertainty.

Sekhar’s advice to advisors struggling to tap into the next generation of investors is threefold. “Focus on the next generation of your existing clients, evolve your offerings — your products, your knowledge, your technology — and think about how to innovate,” Sekhar says. “Are you willing to create YouTube content? Are you willing to think about a niche? These are things that can change how younger clients view you.”

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