It's often assumed that financial advisers should, and do, devote most of their attention to older, established clients. That's where the assets are. Recent research suggests, however, that advisers would do well to seek and serve younger clients who don't fit the conventional mold.
In a poll last year, financial advisers told Natixis Global Asset Management that 68% of their clients were over the age of 50. A third of that group was born before Harry Truman became president.
Natixis
conducted a separate survey this year of 750 Americans with more than $200,000 in investible assets. The results strongly indicate that focusing on rising, relatively affluent young investors could help advisers build more diverse, enduring businesses.
That's because, contrary to conventional wisdom, younger investors are much more willing to work with financial advisers than baby boomers. They're more self-motivated to improve their finances. And they're more accepting of innovative portfolio techniques, a key to a durable investing strategy.
(Game Changers: Advisers must prepare for great generational wealth transfer)
Gen Y values financial advice
Younger respondents very much want and value professional financial guidance.
The survey showed that 92% of the 221 investors in Generation Y (between ages 18 and 34) and 93% of the 254 respondents in Generation X (ages 35 to 50) think that expert advice is important when making financial decisions. Indeed, 68% of each group of respondents works with an adviser at least occasionally.
In contrast, a comparatively low 79% of the 234 investors polled in the baby boomer generation (age 50 to 69) say financial advice is important in their decision making. Similarly, 63% of the surveyed boomers have a relationship with an adviser — a figure that is five percentage points less than for younger investors.
Together, the figures suggest that while affluent members of Gen Y have already formed relationships with advisers, financial professionals have room to grow. From traditional networking to outreach via social media, there are myriad ways for advisers to connect with this group.
(Related read: Millennials to financial advisers: #DoingitWrong)
Millennials invest with a purpose
Each day, more and more boomers approach retirement. They might be expected to be the most goal-oriented investors. That doesn't appear to be the case.
Only 47% of boomers surveyed by Natixis say they have set clear financial goals for themselves. Likewise, just 47% of Gen Xers surveyed have investment objectives in mind.
The investors in Gen Y are well ahead of their peers, with 57% of respondents saying they know what their financial goals are.
Open to alternatives
Majorities of investors in each age category agree that they'd like to take a new approach to investing. They see this as a way to improve returns and protect the money they've built up already.
Younger investors buy into financial innovation with the greatest enthusiasm.
The survey asked investors if a nontraditional approach to investing, one that uses more than simply stocks and bonds, is a better way to earn returns or manage a portfolio.
In response, 78% of the millennial respondents endorsed this type of investing approach, compared with 70% of the Gen Xers and only 58% of the boomers.
More than three-quarters of the millennials (76%) invest in alternative assets today, followed by 62% of Gen Xers. Less than a third of baby boomers (32%) say they hold alternatives.
(More: When it comes to retirement savings, millennials blow past boomers)
A mix of clients
To be sure, investors often defy expectations and categorization. Not all millennials — or Gen Xers or boomers — will behave or think the same way.
However, it's interesting to see what this specific group of younger investors is willing to do to reach its goals. They have a comparatively strong idea of why they are investing. They won't take the customary investing path if that can't help them achieve what they want. And, for all their determination, millennials are willing to take direction from experts.
For advisers, the results of this survey suggest they should not simply go where investors are, but where they will be next. Working with younger investors can add depth to their practices and enhance sustainability.
David Giunta is president and chief executive officer of U.S. distribution for Natixis Global Asset Management.
