How to Capture Wealthy Under-50 Investors for Your Firm

Cisco IBSG survey finds under-50 segment will switch to advisors that meet their needs

Wealthy U.S. investors under 50 years old represent a huge revenue opportunity for financial services firms that are willing to compete for their business, according to a new report released this month by Cisco Internet Business Solutions Group (IBSG).

Cisco IBSG recently surveyed 1,000 wealthy U.S. investors (those with at least $500,000 of investable assets) in an effort to understand their attitudes toward investing in today’s challenging economic environment, their relationships with financial advisers and how they prefer to interact with financial services firms and advisers.

These were the survey’s key findings:

  • Wealthy investors have suffered losses that soured their attitude toward investing and made them pessimistic about their future prospects.
  • Despite these concerns, most wealthy investors have stayed with their financial advisors through the financial crisis, and remain satisfied.
  • Wealthy investors spread their assets across multiple firms and financial advisors.
  • Nearly one-third of wealthy investors do not have a financial advisor because they either doubt the financial advisor value proposition, or think the fees charged are too high, or do not believe advisors have their clients’ best interests at heart.

The Wealthy Under-50 Opportunity

Cisco IBSG’s research found that wealthy investors under 50 years of age are a crucial customer segment, holding 28% of total wealth in the U.S. across all asset classes. This group, the survey found, constitutes an $18.6 billion revenue opportunity for North American financial services firms that are willing to meet their needs; conversely, they pose a serious challenge to wealth managers that fail to tailor their approach to these investors.

The study found that Wealthy Under-50s spend more time managing their investments and interact more frequently with their advisors than older investors do. They are also more likely to change advisors than older investors, in part because wealth managers do not deliver the appropriate mix of interactions.

Wealthy Under-50s want faster, more convenient options for interacting with their advisors—in-person meetings, telephone conversations and email no longer suffice. Desired interactions and services can be enabled by technologies, such as high-definition video conferencing and social networking, according to the Cisco IBSG.

Cisco IBSG made these recommendations:

  • Financial services firms should seek to grow their “share of wallet” with investors who have their assets spread across multiple financial advisors by building and offering enhanced capabilities that deliver greater convenience and access to expertise that investors want. Wealthy Under-50s, in particular, are willing to move their assets to gain these capabilities, so firms have an opportunity to grow their share with these investors.
  • Wealthy Under-50s are much more likely than older investors to switch firms or advisors, so client acquisition and retention strategies should focus on this segment while they are “in play.”
  • Firms that can offer less affluent investors some of the services a financial advisor provides—but more efficiently, and at lower cost using online functionality—can also attract investors with fewer assets in a profitable way.
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