‘Generation Now’ key to sustaining RIAsNews added by Benefits Pro on June 23, 2014
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By Nick Thornton

Retirement advisors who have spent their careers growing a substantial book of business are beginning to feel the effects of an aging America.

Data from Charles Schwab Advisor Services semi-annual Independent Advisor Outlook Study is clear: advisors who rest on their laurels will see their income decline, if they haven’t already.

That’s because nearly 40 percent of RIA clients are already retired, and another 30 percent are less than 10 years away from leaving the workforce.

Most of those retired clients — 63 percent — are already withdrawing from their retirement portfolios, including the principal invested, according to the survey.

The math is simple, especially for fee-based advisors: as accounts shrink when clients withdraw assets, so does advisor income.

While that should be disconcerting to most advisors, all is not lost.

Another Schwab survey, the Generation Now Study for RIAs, looked at an exclusive group (only 40 were surveyed) of men and women aged 30-45 with investable assets of $500,000 and a household income of at least $150,000.

According to Cerulli data cited in a Schwab press release, the 30-45 year old demographic controls $3.5 trillion in investable assets.

Schwab coins the group “Generation Now,” implying time is of essence in tapping this valuable segment as their older counterparts begin to liquidate accounts.

Then there is the question of wealth transfer. By 2050, $16 trillion in wealth will change hands from parents to children, according to Cerulli.

That phenomenon presents risks, and some opportunities, according to the advisors surveyed by Schwab: 37 percent regard the wealth transfer as a risk, as assets will be spread out among more people who may not have an existing relationship with their parents’ advisor; 40 percent of advisors see the transfer as an opportunity, though they acknowledge the challenge in securing the new business.

“We feel that the next generation investor is unequivocally an opportunity for independent advisors,” said Bernie Clark, head of Schwab Advisory Services. “They have significant wealth, and their individualized priorities along with the competing financial needs in their lives can benefit greatly from the customized, client-focused advice that independent advisors can deliver.”

Capitalizing on younger wealth means advisors will have to continue to articulate a clear value-proposition with prospects. The question of how to do so is open to some debate.

While 68 percent of the advisors surveyed maintain that in-person contact must remain the crux of their communication model, and that social media can never wholly replace personal interaction, there is no doubt that advisors are going to have to deploy multiple strategies to secure relationships with younger clients.

Almost 60 percent of those surveyed said they use social media and online resources, but primarily as marketing tools, and not as a means of engaging directly with current clients.

Only 32 percent of the advisors and firms surveyed said social media is vital to communicating with the next generation of wealth.

“It will be critical that everyone, from advisors to office support staff, knows and understands Generation Now and is able to meaningfully connect them at every point of interaction to their firm’s value proposition,” said Clark.

Originally published on BenefitsPro.com
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