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Advice Firms Warned to Overhaul Businesses to Cater for Millennials and Gen Xers

By Alex Padalka May 10, 2018

The generational wealth transfer is happening much sooner many advisors think — and RIAs who want to stay relevant better be ready to cater for a much younger clientele than they’re used to, according to a recent survey by TD Ameritrade Institutional.

By 2023, 41% of RIA clients will be made up of Millennials and members of Generation X, according to the survey of 300 RIAs with an average of $161 million in client assets conducted in the fall of 2017. Gen Xers will grow from 21% of RIA clients today to 27% in 2023, while Millennials will grow from 9% to 14% of all clients, TD Ameritrade found. Baby boomers, as a proportion of RIA clients, are expected to drop from 46% today to 43% in 2023, while seniors are expected to decrease from 23% to 14% of RIA clients, according to the survey.

Some RIAs are getting ready for this demographic change, but far from all. For example, 30% of the RIAs surveyed say they’re hiring younger advisors and 24% are hiring college interns, TD Ameritrade found. Only 42% of RIAs are actively overhauling their marketing and networking strategies to lure younger clients, the survey found.

A full quarter of the RIAs surveyed say succession planning or hiring talent are the challenges with the biggest potential to impact their companies, while 22% of respondents see their shortage of young advisors as a threat to their growth potential, TD Ameritrade says. On the other hand, 44% of RIAs aren’t making any moves to ensure they have young talent in the pipeline, and 23% say they’re not actively working to attract younger clients, according to the survey.

Advisors who are hoping to get next-generation clients may also have to do some more extra work thanks to Millennials’ parents, meanwhile. On the one hand, 79% of Millennials between 25 and 29 and 70% of those between 30 and 35 say their parents have talked to them about finances, by PNC Investments found in a survey.

But on the other hand, Millennials’ parents urged saving over investing — and only half of the respondents say their family engaged in good money management, according to PNC’s recent survey of people 21 to 25 with self-reported investable assets of at least $5,000 or those with qualified retirement accounts and at leas $1,000 in assets conducted in January.