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RIAs Must Move Quickly to Serve Younger Clients: Study

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What are registered investment advisors’ future clients going to look like? According to new findings from the TD Ameritrade Institutional 2018 RIA Sentiment Survey, the demographic composition of their client base will look dramatically different five years from now.

The share of baby boomers, who today make up 46% of RIA clients on average, is expected to drop slightly to an average of 43% of clients. Gen Xers and millennials are expected to comprise 27% and 14% of all clients, respectively, up from just 21% and 9% today. The share of seniors is expected to fall from 23% to 14% of clients.

According to Kate Healy, managing director of Generation Next at TD Ameritrade Institutional, this should be a wake-up call to those who think that next-gen wealth is literally still a generation away. “In five years, over 40% of your clients are going to be Gen X and millennial …,” Healy said. “You’ve got five years to figure out what you might want to change in your service offering, your fee structure, your hiring.”

Advisors may need to rethink their approach to finding both talent and clients in order to continue on their growth trajectory, she adds: “What are the changes you need to make? How are you going to market to this next generation?” she asked. “How are you going to attract them to your firm? Think about the things that you need to do — including taking a look at your service offering.”

The survey finds that 42% of RIAs say they are working on changing their marketing and networking to attract younger clients. According to the research, future-thinking advisors are using a variety of tactics to attract next-gen clients.

For example, nearly 40% are advising 401(k) plan participants. Meanwhile, 47% are re-evaluating how they charge for services, whether that means introducing flat fees for financial planning and coaching (33%) or adjusting pricing and fees in some other way (14%). The survey also finds that more than 20% of RIAs are lowering asset minimums, perhaps because they’re recognizing that this demographic tends to be in the early stages of wealth accumulation.

In addition to these changes, the survey finds that hiring practices are reflecting a greater next-gen focus, which can help attract younger clients. According to Healy, advisors need to ask themselves: “Do you have the right people on staff?”

The survey reveals that 30% of RIAs are hiring younger advisors, and 24% are hiring college interns. The survey also finds that one in five RIAs plan to hire and train career changers, providing an opportunity for caregivers re-entering the workforce and professionals from other industries or the military.

The 2018 RIA Sentiment Survey is based on a telephone survey conducted by MaritzCX between Nov. 27 and Dec. 7, 2017, with 300 independent RIAs who work with an average of $161 million of client assets. Participants, both clients of TD Ameritrade Institutional and non-clients, were asked to share their views on the economy, the outlook for their firms and the RIA market overall.

A summary of what RIAs say they are doing to adapt and woo next-gen clients is as follows: • Changing strategy — change networking/marketing, 42%; advisor 401(k) plan participants, 39%; hire younger advisors, 30%; and manage 401(k) plans, 29%. • Changing pricing/fees — offer flat fee for financial planning or coaching, 33%; lower asset minimums, 23%; adjust pricing/fee structure, 14%; and offer low-cost, robo-advice service, 12%. • Not putting a strategy in place — not currently working on a strategy, 23%; and not having a strategy but developing one, 4%.

Staff reporter Emily Zulz can be reached at [email protected].


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