A white paper released by Penton Financial Services shows that with more women and millennials creating wealth, it is time for advisors to shift their focus. “Increasingly, it’s no longer just baby boomers and middle-aged men who control wealth. With women around the world building successful careers, they now have significant influence in the management of family fortunes, in addition to their own finances,” it says.
It further points out that, millennials now make significant salaries sooner than previous generations, while also inheriting from their affluent parents. Yet the wealth management industry has not adapted to these shifting demographics, still focusing its attention on the patriarchs who historically have created and controlled wealth, it says.
Need for change:
For wealth managers to continue to prosper, they need to adapt their practice to accommodate the newer demographic of people. “Just 7% of wealth managers use technology to segment their clients by age — and none do so by gender. Instead, the highest proportion (38%) continue to do so by current assets — as they’ve always done,” says the whitepaper.
Adapting to the new demographics:
While the goals of these newer demographics might be similar to that of baby boomer men, advisors need to adapt a different strategy to approach them because of their varied attitude.
“While female clients plan for the same financial issues as men — selling businesses, getting married, having children, paying for education, planning for retirement — their approach to wealth planning can be markedly different in some areas. For example, they may have different attitudes to risk, longer-term views about investing and distinct takes on life stages. Women may also make decisions more collaboratively, researching through their networks and online, as opposed to making unilateral decisions. Wealth managers need to adapt to these clients styles and needs,” it says.
When it comes to millennials, wealth managers must understand the profound difference between the generation born from 1980–2000 and the ones that preceded it. In fact, the white paper says that 46% of those who responded to the survey see robo advisors as a critical tool to engage with this generation.
“However, as the millennial generation ages, they will come to value personal contact with relationship managers. As their wealth accumulates and responsibilities multiply, their affairs will inevitably become more complex. At that point, they will need to discuss and plan their affairs in more detail,” says the whitepaper.
Rising to the challenge
According to the paper, technology can play a big part in helping wealth managers attract millennials and women. Also by adopting tech, advisors will be able to approach this demographic in a more systematic way.
“As with any service industry, wealth management advisors must find ways to change their organizations to reflect clients changing needs and better focus on women and millennials, who increasingly control a larger proportion of wealth,” it says.
