An enormous generational wealth transfer is underway. The financial advisors who prepare should benefit, but those who don't could see the value of their business decline.
Recent research by Fidelity Investments shows 57% of existing client assets will pass on to younger individuals by 2045, and firms with clients that have a higher average age will be particularly exposed to this anticipated transfer of assets.
A recent Cerulli report even found that more than 70% of heirs are likely to fire or change financial advisors after inheriting their parents' wealth. But with these warning signs comes a great opportunity.
Young investors are becoming more interested than ever in working with financial professionals. They value and are willing to pay for professional advice, are motivated to improve their finances, prefer to consolidate assets with a primary advisor, and are loyal clients.
In the past year, millennials and Gen Z referred their advisors three times more than their Baby Boomer counterparts, and two-thirds of millennials and Gen Z want to consolidate more of their assets with their primary financial advisor in contrast with 19% of Baby Boomers, according to Fidelity research.
Amidst this changing financial landscape, it is time for advisors to ask themselves: are they ready to engage with millennial and Gen Z investors?
5 Unique Needs to Fill
Success in attracting younger clients might not happen by using the old reliable playbook that worked with previous generations. Millennials and Gen Z have different world views and unique life experiences, and they are not a monolithic group either.
They might need a different approach when it comes to financial planning, so the question is: "How can we better S.E.R.V.E. young investors?"
Support: Young investors desire collaboration. They don't want to delegate their finances to an advisor and walk away. This means a financial advisor who can build a supportive partnership through timely education and transparency will stand out.
Engage: Young investors want more hands-on guidance. They seek responsiveness and accountability to help them stay on track. An advisor who can act as a behavioral coach has the edge.
Relate: Young investors want an advisor who is relatable to them, and diversity is a critical part of this. For business leaders, this can be achieved by diversifying their team of advisors to serve this new generation that is significantly more diverse.
