Even though most advisors are running their business better with improvements in such hard areas as technology and compliance, many of them have made less progress in building strong relationships with today's clients. They also risk missing out on tomorrow's growth by neglecting audiences beyond the traditional affluent white male client.
These advisor alerts aren't mine. They come from an eye-opening "Investor of the Future" study released in June by Pershing Advisor Solutions.
Consider this: More than half of adult Americans are single, according to Pershing's Kim Dellarocca (as reported by ThinkAdvisor.com on June 6). Many women are their family's sole breadwinner. Same-sex marriage is already legal in 10 states (and the recent Supreme Court ruling will extend federal benefits to same-sex couples), and racial minorities will become a majority of our population over the next 30 years.
How can advisors use this information to stay current and embrace the future? I questioned Dellarocca, head of segment marketing and practice management at Pershing, to glean her insights and recommendations.
Olivia Mellan: According to the study, female advisors tend to have a more diverse client base with whom they are more deeply engaged. Does this imply that male advisors focus more narrowly on niche markets?
Kim Dellarocca: I think the male advisors we surveyed grew their business by focusing on where the wealth was during that time. For example, if an advisor is 55 years old and has been working since age 25, his typical client over the past 30 years—an affluent white male head of household—reflected top earners during that time.
When women entered the advisory business, many looked elsewhere for clients: for other women, for clients with different lifestyles, for more ethnic diversity. Some male and female advisors haven't changed their business model to catch up with where the wealth is now.
OM: Should advisors have a diversified "portfolio" of clients? What research findings point to (or against) this idea?
KD: Yes, they should be diversified, and they don't have to look far to diversify. Among their existing relationships, they can diversify immediately by cultivating the wives and children of their existing male clients. These different genders and generations are important segments to develop.
OM: I've urged advisors for years to not only cultivate both spouses but to facilitate family retreats involving all generations. Speaking of client diversity, your survey report says "Diverse groups almost always outperform homogeneous groups […] by a substantial margin." Can you explain further?
KD: Several outside sources have reinforced the point that diversity is good for business. For example, companies with more women in management positions and more diversity among the staff tend to perform better [than those with a more homogeneous makeup].
Diversity—whether measured by gender, age or ethnicity—encourages you to look beyond your sameness. If you're always around those with whom you agree, where's the innovation? Who's going to point out your blind spots? With a more diverse advisory practice, you will also get more views that closely mirror the demographics of future clients and the work force of the future.
