Ignore Next-Gen Clients at Your Own Risk

According to a new report, advisors may be missing out if they are reluctant to target next-gen investors. Research from Fidelity Institutional Insights found that investors under the age of 40 are inheriting more than $540 billion in the United States every year, 30% of the total wealth transferred. In addition, data from Cerulli Associates shows that the demographic will control three-quarters of $84 trillion in inherited wealth by 2045. The Fidelity report is a wake-up call for advisors that shy away from young clients due to higher debt, fewer assets, and generational differences. Fidelity Investments vice president of practice management and consulting, Anand Sekhar, said the revenue-weighted age of the average Fidelity advisors client is 65. According to Sekhar that creates a huge problem for advisors in the future. With older client rosters, advisors could see widespread drawdowns and not enough clients to take their place. Making matters worse is that only 13% of advisors are engaging with clients children and grandchildren, which puts billions currently managed at risk. Fidelitys data suggests that if firms can reduce the revenue-weighted age of clients by just seven years, from 69 to 62, it can increase a firms growth tenfold. The research also suggests that establishing those relationships now could produce greater returns as investors under 40 are investing earlier than their parents and are willing to pay for advice.