Family dynamics have generally played a crucial role in shaping the relationships established by advisors and their clients. In the past, the family unit was typically characterized by a working dad who served as both sole breadwinner and primary contact for the financial advisor. Other members of the household would usually include a stay-at-home mom, two-and-half kids as well as a dog all happily ensconced in a home surrounded by a white-picket fence.
But families’ structures and their underlying dynamics have changed significantly, to say the least. For starters, women have joined the workforce in greater numbers and are pursuing careers more than ever before, even as divorce has become more prevalent, leading to more blended and single-parent families. In more recent times, we have begun to see the expansion of the definition of family to include dynamics such as first-time older parents, multi-generational households and same-sex couples.
From a financial advisor’s perspective, understanding the new dynamics that are redefining the meaning of family will be an essential part of the job. The retail client of the future won’t be a single breadwinner making decisions for the household—in many cases the retail client of the future could be the entire household itself.
The following are some suggestions for how advisors can better prepare themselves to support emerging new family dynamics under the “family as client” model:
• The financial advisory practice of the future needs to reflect the investor of the future. Many of the changes that are ongoing within family units are reflective of broader demographic and cultural shifts. The country is continually becoming more diverse, a trend that will only accelerate in the future as Hispanic and Asian populations, among others, continue to grow.
On a similar trajectory, women continue to build on previous gains and, according to the Department of Labor, are projected to account for 51 percent of the labor force’s growth between 2008 and 2018. At the same time, attitudes regarding a range of social issues such as same-sex marriage have shifted dramatically over the last couple of decades.
Therefore, it is crucial to have a mix of professionals on staff that represents different demographic and cultural backgrounds. The clients of the future are likely to seek out advisory practices that not only demonstrate an understanding of their unique needs, but also mirror the rest of society.
Young investors, especially, will value diversity, seeing it as a prism through which to view a business’ outlook on a range of issues that are important to them. More so than any previous generation, millennials will be far more likely to ask themselves, “If my advisor hasn’t evolved in this area, what other areas of their business are behind as well?”
• The advisor’s technical skills on a stand-alone basis will become less relevant. Expertise alone on the technical aspects of financial planning—such as asset management, estate planning and tax planning—will not be enough for most advisors to distinguish themselves in a marketplace where such services are becoming increasingly commoditized.
Financial advisors will need to go beyond the traditional core set of offerings by providing clients with personalized advice that reflects the advisor’s understanding of the client’s broader life goals and demonstrates a greater level of empathy and emotional intelligence. Think of the FA of the future as playing more of a “financial life coach” role.