Advisers need to attract their clients’ heirs rather than focusing on the majority of their customer base which remains in the baby boom generation and therefore biased to those moving from being net earners to net spenders, Vanguard Asset Management has said.
Vanguard labels the baby boom generation as 54 to 69. It says that generations X, 34 to 53, and Y, aged 19 to 33, are rapidly becoming more relevant for financial advisers.
As this demographic shift plays out over the next decade, advisory firms will survive or not based on their level of engagement with younger clients, both in capturing their earned assets as wealth grows and handling inherited assets from parents that may already be clients.
Neil Cowell, head of UK retail sales at Vanguard Asset Management, told FTAdviser that the business is preparing ways to support advisers with some tactical solutions around inter-generational planning.
“We’re seeing adviser firms start to think about these issues. A white paper we launched at the end of last year called the Adviser Value Index found that it is those adviser firms which work with their clients to set clear goals and consider the inter-generational aspect, that are really driving the highest value with clients.
“To be clear: I don’t think we’re seeing this wholesale in the adviser community, but as firms start to think about articulating their value post RDR, then this is coming to the fore.”
Mr Cowell suggested several tactical elements that he is starting to talk to advisers about, including redefining the client meeting process to incorporate a family update, with adult children or the executor of the estate.
“Taking on difficult conversations about money, in terms of wills and who’s getting what, is important and they also need to ensure that multi-generational work is not ad-hoc, but its more a defined part of that exchange of value offering to clients.”
A 2011 study cited by Vanguard in the US found that of those who inherit assets following the death of both parents, 95 per cent move the money away from the incumbent adviser.
The firm suggested that advisers can make a significant difference by focusing on just two areas: developing meaningful relationships with clients’ heirs and engaging younger investors on their own terms.
As detailed in our technology report earlier this year, just having a website and phone support is not enough, with younger generations expecting chat messaging or online video calls, while brands also need to be build via useful content on social media.
One firm that shows the way to engage younger clients is Nutmeg, the online savings and investment management service, which has a core deomgraphic of 30-50 year olds, followed by a second tier of 22 to 30 year olds.
Iqbal Gandham, chief marketing officer at Nutmeg, told FTAdviser: “One thing the industry hasn’t got right yet is to use things like customer relationship management, that’s more than just sending out emails, it’s about properly targeting things, making them relevant to customers.
“Video also hasn’t been explored properly as a medium, because people are moving away from actively reading a webpage to passively watching something, so that’s got to happen more and more.”
Mr Gandham, commented: “In traditional wealth management you traditionally have face-to-face meetings, so we’re just replacing them with digital interface, for want of a better term.
“Customers can consume web-based content in their own time, in the format they actually want, then when they have a question they can ask that whenever they like.”
