The Changing Affluent Investor

There are three important groups to understand and reach out to in the coming years:

Women. More than one-third (37%) of the affluent population of North America is female.⁷ According to one study, 42% of women say their wealth comes entirely from their own salary and bonuses.⁸ Amazingly, however, fewer than 20% of affluent women currently work with a financial advisor.⁹ This suggests that there is a significant disconnect between what affluent women want from advisors and what advisors are offering them, and it presents a significant business opportunity. 

As is the case with any niche, working effectively with affluent women requires a deep understanding of their situations, values, goals and needs. Armed with that information, advisors can determine how well their current business model is set up to serve women and figure out what services they need to strengthen or add. 

It may mean they need to make structural or personnel changes to their business in order to attract and serve women effectively. As we all know, the advisor industry is made up predominantly of men. But people tend to be most comfortable around those who look like them and have had similar experiences. This means the RIA community must expand and diversify to include women, so that female clients feel they have the advocacy and support they need.

Intergenerational wealth. Wealth protection and wealth transfer are of growing importance to the wealthy, most of whom are in their 50s and 60s and have children. In fact, RIA clients are more concerned about protecting and transferring wealth than clients who use other types of providers.¹⁰ 

These issues are also on the minds of RIAs-50% of whom expect some of their revenue growth going forward to come from their current clients' heirs and family members.¹¹ Unfortunately, many advisors may not be well positioned to capture this intergenerational wealth transfer. Advisors lose approximately 50% of assets under management when clients' assets are passed on to their children.¹² 

Keeping those assets will mean coming up with targeted services and a unique value proposition rich enough to appeal to both parents and children. It will be vital for advisors to actively communicate with their clients' adult children in family discussions and educational meetings. Helping kids understand their parents' rationale for investing can help solidify the advisor's place and value in a family's life.

Young affluent investors. The speculation is that today's 20- and 30-somethings won't be as successful as their parents. But newly wealthy young investors are a growing (if currently small) demographic. Affluent investors under age 45 increased from 13% to 17% of the affluent category in 2010.¹³ 

This group presents its own unique set of challenges, however. They will be more diverse in gender, race and ethnicity than the current client base of many advisors-a reflection of the growing diversity among the broad affluent population. What's more, these investors are comfortable with globalization and international markets (emerging economies, in particular), and will expect advisors to access these opportunities through a variety of investments, including local market products.