It is the best and the worst of times in the financial advisory business.

Things are probably going great in your practice today because investor confidence has been improving. But five or 10 years from now, a new generation of investors could wreck it.

Yes, asset growth is booming, but many financial planning broker-dealers are disappearing as they miss connecting with the next generation of investors.

That anomalous analysis was recently delivered by Pershing officials. They told hundreds of advisors and other financial professionals at the Discover 2014 conference in Manhattan on Monday that their business, along with that of their parent, BNY Mellon, has been strong after many fat years in the stock market. Yet all is not good in the business.

“Since 2007, a broker-dealer has been going out of business every two days,” said Jim Crowley, Pershing chief relationship manager.

What’s wrong?

Seventy percent of advisors, he added, “are ineffective in communicating their value proposition.”

The irony is financial advisors are today more needed than ever, with millions of would-be clients looking for advice. Still, there are many reasons why investors, especially younger ones, are not interested in your services. These include a generation gap as well as a failure to define your advisory practice and what it does. There is also a danger to advisory practices, Pershing officials warned, in the inability to pass advisory relationships from one generation to the next.

This is all happening in a brokerage/advisor world of creative destruction. It is one in which some firms are prospering at the same time other broker-dealers have been dying, Pershing officials said.

Nevertheless, they told the audience, retirement assets are booming and the need for their services is dramatically increasing. But how will advisors survive the coming transfer of wealth from one generation to the next as well as the millennials’ creation of wealth?

“You have to be able to answer two questions,” said Ron DeCicco, chief executive of Pershing. “What is the value that you deliver to your clients? And secondly, how do you communicate that value to your clients?”

DiCicco said that the 75-year-old Pershing, along with its custodian parent, BNY Mellon, are growing at a strong pace (See sidebar below, “BNY Mellon and Pershing by the Numbers.")

The value proposition, Pershing officials write in a recent paper, often is the first impression potential clients have and can be the catalyst for a future relationship.

“It is also an opportunity for advisors to promote business growth by using language that differentiates themselves and targets their ideal client base by articulating attributes and features that appeal to specific demographics. Of course, the real test is delivering on what you promise,” according to the recent Pershing paper, What Do Top Advisors Say and What Do Investors Really Think?

Advisors, DiCicco added, also must help a new generation of investors by adding more professionals, many of whom should be new to the business or at least in the same age bracket.

“It’s estimated that we’ll need 237,000 advisors over the next 10 years to serve new investors,” DeCicco said. Yet the average age of an advisor today is 51. This group of advisors, he added, is not being replaced “at a fast enough clip.” He added that firms should be working on developing training programs that attract “younger and more diverse advisors.”

This, DeCicco added, will help firms attract millennial investors, those born between about 1980 and 2000. They now represent about 25 percent of the U.S. population and are a growing part of the nation’s wealth. However, these 80 million Americans are being missed by many advisors.

“In fact, they were almost as likely to ask a friend for financial advice as they were to go a financial professional,” DeCicco noted.

Only 16 percent of this group reported having an advisor as the main source of financial planning, according to a BNY Mellon/Oxford University poll. The majority of these millennials, the poll said, also said that “advisors were failing to connect with them” and that they were uninterested in most of their products.

Worse than that, DeCicco said in reviewing the poll, is what could be happening to many advisors over the next few years. The “majority of these respondents are firing their parents’ financial advisors when they receive an inheritance.”

And the threat of these abortive relationships, he added, will not be avoided if the bull market continues.

“They’re not firing them because the advisors are performing poorly,” DeCicco said. “They’re firing them because the advisors have not taken the time to establish a relationship with them.”

Sidebar: BNY Mellon And Pershing By The Numbers

BNY Mellon: Assets under management $1.65 trillion (A 7 percent increase over the last year). Assets under custody and administration, $28.3 trillion (a 3 percent increase).
Pershing: $1.5 trillion in global client assets. 41.3 million individual security positions on the Pershing platform, an 8 percent from the end of 2013.
Source: Pershing