Financial advisors will receive a serious jolt in the next seven years as Generation Y rapidly emerges as the dominant demographic group in the nation. The Millennials are projected to represent more than 50% of the U.S. labor force by 2020, Pershing CEO Ron DeCicco warned advisors at the firm's annual conference yesterday.
It probably will represent the biggest transformation of the American demographic landscape since baby boomers took over the U.S. labor market in the 1970s and 1980s, while the World War II generation transitioned into retirement.
Contrary to the popular perception, many of the risk-averse Millennials already are starting to accumulate significant amounts of wealth. That is likely to accelerate dramatically in the next seven years as the economy improves at the same time as baby boomers retire and open up new opportunities for younger workers in both the corporate and entrepreneurial sectors. Depending on precisely what years one picks, Gen Y is generally estimated to encompass 90 million to 100 million Americans born in the two decades before 2000.
For advisors to continue to thrive, they must become far more adept with technology, Pershing executives said. Even though the oldest Gen Y clients will only be 40 years old in 2020, "they need to be on your radar now," DeCicco warned. "They will rely on family, friends and online technology" for financial advice more than previous generations.
Lisa Dolly, COO of Pershing, says advisors tell the custodian and clearing firm that one of their biggest challenges is the inability to perform technology functions. To attract Gen Y clients, they need "to be able to use technology much more efficiently," she said.
More high-frequency change lies ahead, according to DeCicco. It took television 13 years to reach 50 million users, while the Web reached that goal in three years, Facebook did it in a year, and Twitter took only nine months.
"Are you easy to do business with on the Web?" DeCicco asked. If you aren't, future Gen Y prospects may not even give you a look.
Self-directed brokerage advice is likely to emerge as a more serious challenge, Pershing execs said, and many of these start-ups are hiring advisors. DeCicco doubts they will all succeed, but some will.
"Some of them are knocking on our doors," DeCicco said. "We're a low-margin business, but they want to do it on a very low-cost basis," he added, implying that some of these new advisory services might have unrealistic expectations.