Numbers Game

'Clients of the future' will want financial advice, but not how it's delivered today

Survey gives glimpses into the advisory demands of the next generation of clients

Jul 25, 2014 @ 1:18 pm

By Matt Sirinides

In a recent InvestmentNews Research survey, we set out to identify the expectations of younger investors — the “client of the future” — as well as their adviser counterparts. The goal was to capture how the demands for and delivery of advisory services might look in the not-too-distant future. Advisory firms have experienced rapid expansion over the past five years, and for many, strategically managing that growth has involved structuring their practices to build businesses that will remain profitable for years to come. For advisers in this space, looking ahead to the next generation of clients is a critical part of this process. Who, then, is the client of the future, and what set of expectations will they bring with them?

To answer that question, we looked at a subset of 225 investors — nearly a quarter off all investor respondents — who were under the age of 45 and had less than $500,000 in investable assets. Two-thirds of this group (67%) do not currently use a financial adviser. By comparison, 64% of respondents over 45 with $500,000 or more in assets count themselves among advisory clients. Ninety-two percent of our largely unadvised group expect their income to increase by at least 5%, year over year, compared with the 49% of those in their mirror group who believe their income will remain the same or decrease over the next five years. Young investors are also hungry for financial advice, with 84% of those without an adviser saying they would use one in the future, and 68% of those who do have an adviser saying they will need more direct, personalized advice in the future. As the young grow older and wealthier, however, advisers should anticipate a different set of expectations from this next crop of clients.

To win them as clients, advisers may be able to continue relying on referrals, as 86% of our under-45 set who do have an adviser found them via referral. But the continued commodification of basic investment advice will compete for the young's attention via online advice, living in a medium that they have grown to trust and are comfortable navigating. They're much more open to using an online portal for financial advice (75% vs. 62% their older counterparts) and they are more likely to work with an adviser who offers online services (78% vs. 65%) than one who doesn't. They're after a wide array of services, such as cash-flow planning, financial plan development, and advice on retirement. In fact, investors under 45 reported some of the highest interest in holistic advisory services among all age groups, and they expect those services to be increasingly delivered online, with 68% of the youth segment with an adviser saying they expect more services to be offered online in the next five years (compare to 48% of those over 45). They also want more frequent contact with their adviser than their elders, but the good news for advisers is that they heavily favor social media, text messaging, email and video conferencing over phone and face-to-face meetings.

These time-saving preferences represent a deeper cultural shift that is currently reshaping the industry. The message to advisers is clear: their services are in as high a demand as ever among the next generation of clients. But in a landscape that is being rapidly reshaped by technology, the platform from which this service will be delivered is shifting quickly and quietly.


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