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Data confirm advisors are focused, perhaps hyper-focused on older clients. Not surprising when considering the estimate that over the next 20 years, the silent generation and baby boomers are poised to transfer a staggering $84.4 trillion in wealth to younger generations.
On the other hand, knowing that that monumental shift is already starting implies there is some risk by continuing to arguably overemphasize older clients. It’s a catch-22 for advisors. With many practices operating on fee-based models and many focusing only on prospects that meet certain asset thresholds – usually well into six figures –it stands to reason client bases are largely comprised of older people.
And that they are, but the chasm is alarmingly wide. The latest InspereX Pulse Survey indicates 59% of advisor clients are in their 60s or older while just 18% are younger than 50 years old. Think about that. If just 18% of an advisor’s client is younger than 50, that says the advisor is missing out on opportunities with a significant portion and all of the age ranges that comprise millennials and Gen Z.
Speaking of Missed Opportunities…
For the purposes of the following, I’ll throw out the age 50 as well as 22 to 24 – a portion of Gen Z – and slightly round up the population. By some estimates, the U.S. population of those in the 25 to 49 age group is close to 110 million. That’s nearly a third of the entire U.S. population.
Obviously, not all 110 million of those people will become clients, but if the percentage of folks working with an advisor were to carry over that group (it’s 35%) that implies there are 38.5 million potential clients out there. For the sake of argument, let’s take 10 million off that figure. It’s still substantial and still highlights missed opportunity.
There’s another reason advisors need to shift their focus to the under 50 crowd. It’s often said that there are just two certainties in life: death and taxes. According to 61% of respondents to the InspereX survey, death is the top reason they lose clients. That percentage can easily be improved upon by bringing older clients’ heirs into the fold and making broader efforts to add more youth to the client base.
““Given the combination of many advisors citing death as the top reason for losing clients, coupled with the small percentage of advisors working with clients under the age of 50, it’s likely advisors are missing opportunities to retain business and engage the next generation of investors and heirs,” said Chris Mee, Managing Director at InspereX.
Advisors Are Flexible
What’s interesting about the above points regarding advisors’ emphasis on the silent generation and boomers is that it belies advisors’ flexibility. For example, advisors are increasingly comfortable with adding clients that aren’t located nearby. Likewise, they’re more frequently embracing digital marketing techniques, which should be appealing to young clients.
Half of those polled by InspereX said that over the past three years their client bases have grown to include folks outside their general area and the percentage of referrals to clients outside the area is nearly the same.
On the marketing front, 12% of advisors are using LinkedIn or Facebook while another 4% are tapping another form of social media, indicating there’s ample room for growth on those fronts. Perhaps those percentages also imply advisors are aware they need to inject some youth into their client ranks.