The TD Ameritrade Institutional “2018 RIA Sentiment Survey” has found that 42 percent of RIAs are preparing for a demographic shift that will require a change in the way they attract younger clients.
In the next five years, the percentage of baby boomer advisory clients will drop from 46 percent to 43 percent, the survey says. Gen Xers and millennials will represent the largest growth spurt: Gen Xers will represent 27 percent of clients in five years, up from their current 21 percent, while millennials will represent 14 percent, up from their current 9 percent. The survey indicated that senior clients would drop from 23 percent to 14 percent.
"In just five years, RIAs expect 41% of their clients to be Gen Xers or millennials. This should be a wake-up call to those who think that next gen wealth is literally still a generation away," said Kate Healy, managing director, Generation Next, at TD Ameritrade Institutional. "Change is coming, which means advisors need to rethink their approach to finding both talent and clients in order to continue on their growth trajectory."
Next generation clients require advisors to come up with a new set of marketing and networking tactics for future growth, RIAs in the survey said. Attracting those younger clients who are set to inherit wealth means advisors will need to hire young advisors into the profession, too.
“Advisors who are not planning now to ensure the longevity of their firms risk being left behind,” said Healy. "Firms that are actively taking steps now to manage for client needs down the road may be better prepared in terms of talent, technology and, of course, clients."
Yet most of the RIAs in the survey said that one of their greatest challenges in growing their firms is hiring young talent. Twenty-two percent said that a shortage of young advisors would have a negative impact on their growth.
While there is a growing pool of good graduates entering the advisory profession, there are not enough to service the next generation of clients, Healy said. Firms need to look beyond the financial and business grads and look to humanities and teaching majors to fill vacancies. She also said that firms will inevitably have to hire more operations and technology staff.
One in five RIAs in the survey said that other good candidates for advisory firms would be women re-entering the workforce, other industry professionals or ex-military members.
Thirty percent in the survey said they are hiring young advisors and 24 percent are hiring college interns.
Forty-four percent of those surveyed, however, do not plan on creating a network of young advisors, and 23 percent said they have no agenda to attract younger clients.