Advisors who want to position themselves for growth should set their sights on the next generation of investors who are poised to inherit unprecedented wealth from their Boomer parents, according to a new guidebook released Wednesday by Pershing LLC, a BNY Mellon company.
Advisors “will most certainly lose assets in the future” unless they “act promptly to claim their share of this much smaller client pool,” the company warns in the press release.
Wooing the next generation of investors, however, won’t be easy. Generation X investors — those between the ages of 32 and 47 — and Generation Y investors — those 31 and younger — generally mistrust financial organizations more than Baby Boomers do and feel less satisfied with the service they currently get from financial organizations, says Pershing.
Moreover, the recent financial crisis has made Gen X and Gen Y investors wary of the market with most keeping a much larger percentage of their assets in cash than Baby Boomers. They’re also more self-reliant and prefer doing their own research or getting advice from family and friends, according to Pershing.
“Studies show that almost 90 percent of prospective heirs say they will move assets to another firm once they receive their inheritance,” Kim Dellarocca, Pershing’s head of segment marketing and practice management, says in a company announcement.
In the guidebook, titled “Generation X and Y Investors Are the Future of Your Business,” Pershing offers suggestions on how advisors can reach and retain these disenchanted investors. It recommends, for example, that financial organizations do the following:
- Customize communications to Gen X and Gen Y investors, particularly those that offer insights into what other investors in their age groups are doing.
- Consider hiring younger advisors to bridge the gap with young investors and give them the “peer validation” they need.
- Offer proactive advice on tough topics, particularly caring for aging parents.
- Improve their use of Internet and mobile technologies to engage younger investors, who rely on them for information as well as communication. The websites should focus what clients can do with interactive and visual tools to help them monitor their portfolios and share control of their investments, Pershing says.
- Ask Baby Boomer clients to introduce their children and grandchildren and engage them in conversations about insurance, estate planning and family business transactions. By bringing children into the discussion, “financial professionals can lay the foundation for new relationships that can endure for many decades to come,” Pershing says.