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June 24, 2014 at 08:59 AM
A pair of Schwab Advisor Services studies released June 19 focus on the opportunities for RIAs among the members of “Generation Now,” affluent people ages 30 to 45 who already control $3.5 trillion in investable assets.
While Bernie Clark, executive vice president and head of SAS at Charles Schwab Corp. (SCHW), says “the research clearly shows that the RIA model is right for these individuals,” advisors who assume they can attract and service these younger prospective clients with the same tactics employed for baby boomer clients will be disappointed.
In an interview at ThinkAdvisor’s offices on June 17, Clark pointed out that those RIA firms who already are having success with ‘Gen Now’ “tend to have a next-gen advisor” on their staff. Gen Now wants “more connectivity” with their advisors, he said, and “on their terms.”
Clark said that “to appeal to Gen Now, you have to look like them,” and since they have “new centers of influence,” often tied to their social media networks, advisors must figure out “how do you get into those places?”
In addition, RIA firms that “embrace technology” see it not as “a distraction,” but rather a business model that improves their firms’ efficiency while also serving as an entrée into Gen Now’s networks. That’s yet another reason for advisors to “hire more younger people with social media” expertise, Clark argued.
The “Generation Now” study was conducted in March and April of this year with 40 participants ages 30 to 45 with investable assets of at least $500,000 or a household income of at least $150,000. Schwab Advisor Services also released the findings of its 15th semiannual Independent Advisor Outlook Study (IAOS), which surveyed 720 independent advisors (all of whom custody with Schwab) from mid-April to early May. The findings of that study dovetailed with the opportunities presented by Gen Now, a term Schwab coined to reflect its belief that younger investors are a significant opportunity now, not in some ill-defined future, for advisors.
Generation Now Findings
The Gen Now study found that these younger affluent individuals share many of the same goals-based planning needs as boomers, which is valuable because “fractional points of return haven’t been driving the relationship” between RIAs and their clients, Clark said. However, they also have different characteristics.
For one, they’re more anxious, based on the experiences they’ve had with terrorism, the Great Recession, the dot-com and housing bubbles and pervasive unemployment, especially among younger people. They also tend to distrust financial institutions, reflected in the high levels of cash they hold in their portfolios. They can’t differentiate between different types of advisors, distrust the profession in general and feel that advisors don’t understand them. However, they hope for financial freedom, which they define as not having to worry about the unexpected, and they mostly want to feel sure that their income and investments will cover the costs of health care, education, housing and elder care expenses.
