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These are interesting times for advisors. The great wealth transfer – the scenario in which an estimated $84 trillion in global wealth will change hands over the next two decades – is speeding along, putting new burden of advisors to become even more client-focused than they’ve been in the past.
The reasoning is simple. For years, the financial services industry has been fixated on baby boomers and older people because they’ve accumulated more wealth than their younger counterparts. Problem is data confirm the percentages of younger demographics – Gen X, millennials and Gen Z – working with advisors are well below the rates of boomers that have a professional on their side.
In part, that’s why some advisors are worried about the great wealth transfer and why many are working to add much needed youth their client bases. The good news is that a sense of optimism permeates the industry.
“Despite the pressure, advisors remain optimistic about their future prospects. Results from the 2024 Natixis Global Survey of Financial Professionals show that they anticipate average of 11.5% growth on a one-year basis and expect annualized growth of 12.4% over the next three years,” notes Natixis.
Client Focus Needed to Drive Growth
It goes without saying that an emphasis on clients is needed in order for advisors to realize their growth objectives. Those polled by Natixis believe they’ll need to add an average of 34 new clients annually over the next three years to hit the aforementioned growth goals.
Importantly, many advisors are aware of the need to show clients and prospects they offer much more than investment management. Said differently, smart advisors know that portfolio performance will always be important, but today’s increasingly demanding clients want more.
“Demonstrating value beyond asset allocation (59%) sits at the top of the list for advisor success metrics. It’s a priority aligned directly with growing client demand for financial planning services,” observes Natixis. “Faced with an impending wave of wealth transfer, advisors also stress the importance of establishing relationships with client heirs (52%). And in the midst of a shifting macro and market environment, advisors say helping clients assess risk tolerance (46%) and helping them get back to investing beyond cash (43%) will be critical as well.”
Advisors are also aware of the importance of retaining assets when clients pass on – a highly relevant issue when considering many advisors’ client rolls are dominated by folks over the age of 60. That effort starts now by encouraging those clients to brings spouses and children to meetings to connect and establish rapport with the advisor.
“The first rule of growing a practice is keeping current clients on the books. In the long term, advisors know assets are up for grabs when a primary client dies, and 43% say they are increasingly worried about retaining assets from client spouses or heirs,” adds Natixis. “In the short term, getting new clients is equally important, but time-strapped advisors currently dedicate less than 10% of their time on this critical growth activity.”
Leverage Efficiencies for Practice Growth
Data confirm attracting and retaining clients are time-consuming pursuits, indicating advisors should harness any possible advantage to save time and resources elsewhere within the practice.
“Advisors spend 43% of their time meeting with or managing clients, but there’s still more work to be done. In the long term, advisors need to address growing client demand for financial planning services, which 57% believe differentiates their practice,” according to Natixis.
That’s a call for advisors to more thoroughly examine the benefits of artificial intelligence (AI), broader technology concepts and model portfolios, among other time-saving avenues.
Related: What Financial Advisors Must Know About Affluent Clients