Pershing LLC, a BNY Mellon company, released a new report offering a look at the makeup of today’s affluent advisor/client relationship. The report, entitled “Investor of the Future: The Quest for Tomorrow’s Affluent Clients Must Start Today,“ offers best practices that firms and advisors can adopt in support of changing client demographics. In the report, Pershing gauges advisors’ perceptions of the broader market, and offers insight into which clients may be most influential in shaping advisors’ businesses in the future.
Unveiled today at INSITE™ 2013, Pershing’s annual financial solutions conference, the report shows that today’s family is fundamentally different than in years past. Today’s modern family no longer primarily consists of married, heterosexual couples with two or more children. Today, half (51%) of Americans are single (some are single parents), many women are the sole or primary breadwinners in their families, same-sex marriage is now legal in ten states and it is estimated that racial minorities will become the majority in the U.S. by 2042 (Source: U.S. Census). So it’s important that advisors recognize the unique financial needs of each of these groups to be able to deliver effective solutions.
“As we see continued shifts in wealth and advisory services, advisors that align their businesses with quickly evolving client dynamics will ensure continued mutual success and growth,” says Kim Dellarocca, head of practice management and segment marketing at Pershing.
The report revealed that advisors’ perceptions of their client-base versus the actual affluent market profiles of these groups are often misaligned. As client segments such as minority groups, younger investors and women comprise a growing percentage of the affluent market, their economic influence will grow. Advisors who neglect to strategically engage these segments as part of today’s client mix may risk a plateau or decline in their business in the future.
The report further concludes that advisors are missing out on an enormous opportunity to keep their clients’ children as investors. Even though more than half of clients considered to be affluent have children 18 years and older, advisors have only talked with about 35% of this investor group about their finances or future investments. Furthermore, only half of advisors (52%) offer expertise in intergenerational wealth transfer and less than half (46%) offer expertise in trust services.
Another important point made in the research is that over-diversification is not necessarily effective. The report warns that advisors put themselves at risk of not being able to meet client expectations if they spread their business across too many different client segments. Rather, it suggests that advisors should identify and focus on a few key groups. This kind of specialization will help advisors deliver greater value and distinguish themselves from competitors.