The wealth management industry is in the early stages of a massive generational shift, as the Baby Boomers hand off client books and practice management responsibilities to a new generation of advisors. Distribution leaders who want to capitalize on this transition to build stronger inroads with teams, or protect their share of wallet from rivals looking to do the same, should be focusing their services on the needs of this next-gen leader.
Understanding this cohort starts by remembering that many of them are part of the often-forgotten Generation X. Financial services has spent significant time thinking about the digitally-oriented needs of the larger Millennial generation, but in reality, it is the Gen Xers—roughly in their mid-40s to late 50s—who have the experience and influence edge over their younger colleagues.
It also is important to consider how events from the Internet age to the great financial crisis influence how they manage money and end-client relationships. Most importantly, it is critical to think about how Gen X is different than other generations in how they manage their practices, portfolios and relationships with asset managers.
Below are three key insights from our Advisor Insights survey, which was conducted earlier this year in association with Horsesmouth.
- They are struggling with scaling their practices to support growth, and want asset managers to come to the table with business-building tools.
Gen Xers struggle like their peers with the aspects of client acquisition and ongoing client service, but they are particularly challenged by the hiring and talent management aspects of running an advisory business. Some 42% of Xers say that adding staff to their office or team is a top-three business challenge in the next three to five years, compared with 31% of Millennial advisors and 25% of Baby Boomer advisors.
Asset managers who invest heavily in their practice management services and see them not as a “value-add” to their products but as an integral part of their relationship will have much more luck getting through to these practice leaders. Some 53% of Gen X advisors say that it’s either important or very important for an asset manager salesperson to understand the nuances of their practice and bring business-building tools.
- They are especially interested in using models to help in individual product selection.
Given their challenges with practice management, it should be no surprise that Gen X advisors are big users of models to invest client money. Nearly four in 10 advisors in the age cohort use models for at least half of their client portfolios, compared with about a third of Millennials and Boomers. Only 28% of Gen X advisors never use a model.
This model-driven approach has a significant impact on how Gen X advisors choose products and the services they need from asset managers. The generation is significantly less likely to see fund family reputation as a top factor in selection (18%) compared with Millennials (23%) and Baby Boomers (24%). Put simply, the name of a fund is less important than how the fund performs and its fit in the portfolios it builds for clients. Managers who can speak clearly about how a product will impact the desired outcomes or personal preferences of end clients will have a leg up with advisors.
Beyond that, portfolio construction help is becoming increasingly important to next-gen advisors. A third of Gen X FAs and even more Millennials (35%) say having a salesperson who can bring such tools to their meetings is important.
- Many are not interested in meeting with salespeople, but those that do prefer face-to-face interactions.
Nearly half of Gen X advisors (47%) said they did not want to interact with asset manager salespeople in any form: in-person meeting, virtual meeting, phone call, email or text/messaging app. For advisors in their 40s, the majority don’t want to meet with wholesalers.
This poses a massive challenge for salespeople trying to connect with the next generation of decision-makers. Firms need to think creatively about resources they can provide to support advisors, whether it is content and thought leadership delivered on the website or stronger home-office partnerships that create inroads through educational training sessions.
The good news, however, is that the cohort of advisors who are open to meeting with wholesalers prefer to do it in a face-to-face setting, which most sales leaders say is the best way for their salespeople to provide value.
Preparing for this generational shift in wealth management requires firms to take a data-driven approach to targeting rising leaders, and ensuring salespeople understand each individual’s business challenges and engagement preferences. Doing so will allow firms to build partnerships that will last for years to come.
To learn more about the data we have available about financial intermediaries, download our "SS&C Distribution Solutions" brochure.
Written by Jackie Noblett
Senior Research Analyst