Throughout SIFMA's Private Client Conference in New York City Thursday were discussions about the major demographic challenges confronting the financial advisory industry and about how firms are responding. The issues are the same ones that the industry has been facing for some years now, but they are becoming more critical as the populations of advisors and their clients age and American society grows more diverse.
Here are some highlights from those discussions and the solutions offered.
The Need for More Female Advisors
Sixty-five percent of the future growth of the financial advisory industry will come from the 50 largest metropolitan markets in the U.S. and Canada, and those markets tend to be very diverse, said Jim Weddle managing partner, at Edward Jones. "To serve them well we need a far more diverse group of financial advisors."
The group should diversify not only by race and ethnicity but also gender. Simply put, the industry needs more female advisors because it needs to attract more female clients. Not only do women live longer than men, but they will control 70% of the wealth transfer from baby boomers to their children, according to Weddle. That transfer involves about $40 trillion in assets, which is more than twice the annual GDP of the U.S.
In addition, said Weddle, given an equal opportunity to be served by a female or male financial advisor, widows will choose a woman.
In younger households, ages 30 to 39, women dominate decisions about household finance.
The Importance of Millennials
The financial advisory industry needs more millennial advisors to attract more millennial clients. Millennials now outnumber baby boomers by 83 million to 75.4 million, and they are more diverse than boomers, according to the Census Bureau. A little over 44% of millennials consider themselves part of a minority race or ethnic group, according to the bureau.
"Millennials act differently, embrace it," said Weddle. "They are your future employees, your future clients."
Lisa Kidd Hunt, executive vice president at Charles Schwab & Co,. told a panel called "The Financial Advisor in the New Economy" that firms "need diversity to reflect the clients looking to be served … We can only take from each other for so long."
She added that younger employees are also interested in a different type of working environment than the traditional one that has dominated the industry — an environment that includes flexible hours, for example. "We need to create a compelling reason to be in this business … to have some sort of excitement to attract the best and the brightest," said Hunt. "The industry is not doing that as well as it could."
The younger generation of potential advisors also places a "great importance on the significance and impact of work they do," said Weddle.
What Boomers Need
