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Advising the next generation

With members of the ‘baby boomer’ generation now contemplating their retirement options, the time has come for financial advisers to look towards the future and start adapting their practice to cater for a younger and somewhat different clientele.

With technological advances and modifications in social values and behaviour, client‎ needs, requirements and expectations are also changing rapidly, according to KPMG partner Ian Smith, who adds that propositions and service models will need to be reshaped to remain relevant to the new generation.

He said: “It is no longer just about attracting the clients who are armed with cash and ready to invest. The successful advisers of tomorrow must focus on building cradle-to-grave relationships with a dramatically different and more diverse client base from today.

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“With demographic shifts, this will include younger, more diverse and mobile generations of investors with heightened expectations and demands.

“Advisers must also be mindful that women are increasingly controlling a bigger share of family wealth.”

The lifestyles of baby boomers – typically defined as those born between 1946 and 1964 – have been influenced by a host of opportunities, such as free university and final salary pension schemes. The same opportunities are not necessarily available to the post-baby boomer generation, according to Robin Keyte, director at Somerset-based Keyte Chartered Financial Planners.

Mr Keyte said: “Although the baby boomer generation has gone through difficult times such as inflation during the 1980s, they have benefited from things such as increases in property value, and will have well-funded retirements, partly because of generous final salary schemes which were popular at that time.

“Looking back at what their parents had, people in their 30s and 40s will feel worse off.”

Attitudes towards retirement have also changed from generation to generation. Matthew Harris, director at Dalbeath Financial Planning, based in Fife, said that when it comes to the new pension freedoms, many of his baby boomer clients are attracted to income drawdown but do not want to take significant risk with the assets they have in drawdown.

He added that the new generation of clients will opt for products that will deliver a lower risk investment experience, but still allow their money to grow faster than inflation.

In response to this, financial advisers are creating investment portfolios for pension and investment clients that keep charges low, and provide a balanced portfolio of equities, bonds, property and cash.

Mr Harris said: “Advisers must cater for the next generation of clients. These clients see the value in having their pensions and investment portfolios managed for them across their working life and during the bulk of their retirement. They rarely intend to buy a lifetime annuity, so require a new type of investment proposition to suit their retirement needs. Failing to develop such an offering will inevitably lead to a fall in client numbers for any adviser.”

Another factor to consider is the erosion over the past 50 years of the stigma attached to debt, as Matthew Allen, director at Middlesex-based Mulberry Chartered, noted.