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Admittedly, that headline states the obvious, but for registered investment advisors, it’s worth remembering that wealth is likely to be the driving force of their practices for years to come. Importantly, it will be in varying forms.
A recent episode of the Simple, but Not Easy podcast – a collaboration between BlackRock and Morningstar – simplified the wealth issue, focusing on two primary aspects: An rising concentration of assets held by ultra- and high-net-worth clients and the often discussed great wealth transfer.
“It is an opportunity, but it does require a deeper understanding of who these clients are, what they want, how to differentiate, and reimagine the offering—and there are a number of ways to do that,” said Liz Koehler, managing director and head of advisor engagement at BlackRock, on the podcast.
Fortunately, many advisors are likely prepared for these wealth issues, some even more so than they currently realize. After all, the great wealth transfer has been ingrained into advisors for years now. Likewise, it’s reasonable to assume many advisors have spent significant portions of their careers working to land business from highly affluent clients.
Be Ready for Evolving Client Needs
A positive for advisors is that a plethora of data points and studies confirm that clients across a variety of age groups and demographics need advisors and want to work with financial professionals.
When it comes to high-net-worth clients and the great wealth transfer, age is clearly relevant. That is to say the average client, particularly those of means, is getting older. Add to that, a smaller percentage live near their advisors, underscoring the need for enhanced use of technology to effectively communicate with these clients.
“The average advisory client is 62 years old, a baby boomer on the brink of retirement,” Koehler said. “And then you have this whole new generation of clients and those set to inherit $70-plus trillion in assets. And they’re just different in terms of who they are and what they want.”
A key for advisors is keeping an open mind, which can be especially advantageous when working with diverse client bases. It bears remembering that the needs of the 65-year-old high-net-worth client are vastly different than those of the 35- or 40-year-old that are on the receiving end of wealth transfer. In an era of evolving client needs and goals, one-size-fits-all approaches won’t get the job done.
“Continue to be open-minded to look at where the industry is headed, where your clients are headed, and the unique and different ways that we can truly serve them. And don’t be afraid to work with partners who are invested in this journey with you,” added Koehler.
Look for Efficiencies
It’s not necessarily difficult to service clients with varying needs and objectives. Advisors are already doing that. However, it pays to look for avenues through which practice efficiency can be enhanced. One place to start can be deploys model portfolios to streamline investment management.
That’s not panacea, but it’s a piece in the broader efficiency puzzle and one that can complement other related efforts.
“Those advisors who are investing in scale—whether it’s through technology, whether it’s through models—are the ones that are able to go deeper with their clients, broaden their reach, and continue to innovate,” conclude Koheler.
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