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Private Ocean’s 4-Step Plan to Serving the Next Generation of Clients

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The RIA industry is fast approaching a changing of the guard, and not just in its workforce (the average age of financial advisors today is somewhere in the mid-50s) but in its client base as well. RIA firms that have spent the last decade serving the baby boomers are now faced with the challenge of attracting the next generation of clients, and they are nothing like their parents.

What’s an RIA to do? In my firm, we are addressing the issue by holding an off-site company event dedicated to a bridge-the-generation game plan for building and serving the next generation of clients. On the agenda: identifying next-gen clients, looking at how they want to work with a financial advisor and what services are valuable to them, and then creating an effective and profitable business model to serve them.  

Step 1: Identifying Next-Gen Clients

The first step to attracting new clients is to begin identifying them. The Gen X (post-World War II baby boom) and Y (also known as the Millennial Generation) demographic is wide-ranging in cultural and religious background, economic status, education and ethnicity. From that population, potential clients typically fit a profile of being in their mid-20s to early 50s, with a college education, 100K+ a year in annual income and up to $2 million or more in assets.  

A trend with Next-Gen clients is that they have an entrepreneurial spirit (many of them own businesses), and unlike their parents before them, they use technology to manage many aspects of their lives.  There is also an increase in women-driven and minority households. While the demographics of these prospective clients are important, what’s more compelling is their psychographics. In other words, it’s not about an age, it’s about an attitude where maximizing their profit and purpose is of equal importance. 

Step 2: Understanding Next-Gens’ Financial Goals

First of all, re-think what you consider a typical household. Today’s family no longer consists of a married couple with 2.5 children. According to the U.S. Census, roughly 44% of Americans are unmarried. The rise in same-sex families and women as bread winners is also indicative of a generational shift. The latest census predicts that racial “minorities” will become the majority in the United States by 2042. 

That’s a wide demographic to shape a business model around, but concentrating on key trends may help narrow your focus:  

  • Innovation. Remember that saying, “Here today, gone tomorrow?” Now it’s more like, “Here today, gone in the time it takes me to hit ‘Refresh.’” An RIA has to stay current on news and trends and develop new ideas to service their clients.
  • Evolution. Clients want to relate to their advisor, not their parents’ advisor. What is your plan for bringing in younger advisors to service these new clients?
  • Technology.  The way you approach technology in your firm needs to adapt and work with you, not against you. Are you using systems that talk to each other? Do you offer your customers a portal to access their financial information?
  • Networking.  Gen X & Y value their social and industry networks, and enjoy connecting with their peers, whether in person or online. Consider this in your event planning and marketing campaigns. 

Step 3: Assessing the Industry Trends

We are in the middle of a gold rush era. New services dedicated to small (and large) clients are popping up online on a seemingly daily basis, offering access and management of personal capital and wealth trust, among others.

Assigning someone to keep track of this has been helpful to our firm, and a regular technology update to the team has helped us stay informed and ahead of the curve.

Step 4: Learning How to Adapt

Once you have all of this information, it’s time to build a profitable business model to serve these new clients. Here are a few high-level indicators for you to consider as your look ahead:

  • RIA firms must continually find ways to be innovative and competitive
  • Getting clarity on why your RIA firm is different is crucial
  • How and how often we communicate must change
  • The focus should be on service and a holistic client experience across all touch points
  • Technology and how it’s leveraged as a quick and convenient tool is critical

However you decide to approach your firm’s future as it’s related to Next-Gen clients, it’s important to stay true to your core beliefs. What should remain steadfast is your firm’s mission to serve clients and to help them live more fulfilling lives before and after they retire.