The new generation of investors on the horizon will need financial advisors for decades to come. Baby boomers are set to pass $68 billion to their children, women are expected to control $22 billion in assets by 2020, black buying power is expected to hit $1.5 trillion by 2021 and Latino purchasing power is forecasted to top $1.7 trillion by 2020. For a firm to grow and remain profitable, it will be crucial to attract the next generation of advisors who can tap into this new clientele while simultaneously maintaining relationships with current clients.
An advisor who’s retiring and is looking to sell their firm should be aware that buyers consider current profitability, future solvency and growth potential. It’s necessary for advisors to look to the future not only to provide stable services to existing clients but also to build out a succession plan that sets their firm up for growth.
Demographic Shift
American demographics have changed dramatically since the oldest generation entered the workforce, and the U.S. is projected to be a "minority majority" country by 2045. Recruiting more advisors from different backgrounds will become increasingly important to help serve this growing next generation of investors.
Generation Next advisors from different backgrounds allow different views on finances, lifestyles and cultural norms. Younger workers, for example, acutely understand the challenges of enormous student debt. Women with children are more likely to have a fuller comprehension of the difficulties of a mother re-entering the workforce. People of different backgrounds may be put at ease seeing someone who looks and sounds like them sitting at the table. In some cultures, for example, money matters are a family affair, while in others, decision-making is primarily the responsibility of one person.
These perspectives will help add to an organization’s capabilities, bringing in new client segments while continuing to grow in traditional markets. It makes strong business sense to start expanding the knowledge, experiences and cultural capabilities that your employees have. This goes beyond being able to understand how to use social media as a marketing tool, and instead means incorporating Generation Next into the core of your company.
As we lose those 100,000 advisors, adding new ones—especially those with an array of different backgrounds and experiences—is vital. Recruiting Generation Next will help ensure that the financial planning profession remains strong for years to come.
Kate Healy is managing director of Generation Next, focused on advocacy for sustainability issues facing the RIA industry. Healy leads TD Ameritrade Institutional's NextGen and Women's Leadership Initiatives. She is a member of the company’s Diversity & Inclusion committee.