Less than a third of financial advisors are actively courting clients under age 40, according to a recent Corporate Insight survey of 500 advisors. Those individuals born after 1975 and their millennial counterparts are an up and coming wealthy cohort, and financial advisors are missing out. Many advisors mistakenly believe that the older age groups are most worthy of their recruitment efforts. The advice business has and age problem. Here’s why these financial advisors may be incorrect in ignoring younger clients: (For more, see: The Changing Wealth Demographic — And How to Leverage It.)

  • There is a substantial cohort of high earners in the 25 to 40 age range.
  • Many of the millennials or Gen Y need investment guidance and help and are willing to pay for it.
  • This group of younger investors will be inheriting large sums of money from their baby boomer parents.
  • As wealthier baby boomers start to spend down their retirement assets, they may be less lucrative clients for the financial advisor.

This short sighted viewpoint from the financial advisory community may cause them to miss out on the opportunity to advise and manage this current and future wealthy group. (For more, see: Financial Advisors Need to Seek Out this Group NOW.)

Who's Courting Younger Clients

The newer robo-advisors, Wealthfront, Betterment, Jemstep and others appreciate the younger investors and understand that if they engage them while they’re younger this group will likely stick with the platform as their assets grow. Many investment houses are also adopting the automated investing platform, further gathering users away from the traditional financial advisor. Vanguard, Fidelity Investments, Charles Schwab Corp. (SCHW) and other discount brokers either have their own automated technology enhanced platform or are partnering with a robo-advisor to better serve clients looking for that type of investment solution. (For more, see: Schwab's New Robo-Advisor Service Explained.)

Then there are the firms, such as Jemstep, who are seeking out partnerships with traditional financial advisory firms to offer a robust foundation for automated investment management. A financial advisor who offers a technology assisted investing platform is set up to approach the younger investor where they live, online. (For more, see: How Financial Advisors Can Adjust to Robo-advisors.)

The age problem of current financial advisors revolves around several mistakes:

  • Avoiding the marketing and cultivating of younger clients.
  • Limiting their use of current financial technology solutions which appeal to a younger client.
  • Believing that their current, older client base will grow their revenues for the long term.

The previously mentioned Corporate Insights survey found that at the end of 2014, roughly 11 robo-advisors managed approximately $19 billion in assets. That equates to a 65% increase in assets under management (AUM) from April to December, 2014. If the automated advisor platforms continue to flourish, and the established financial advisor firms stick with their current approach, the established firms’ AUM are bound to decline. (For more, see: A Financial Advisor's Guide to Millennial Clients.)

How Advisors Can Remedy Age Bias

As with any problem, the first step is recognizing that there is a problem. Next it’s understanding the nature of the problem. The third step is finding a solution to the problem. Without a stable of 30 to 40 year old clients, when the older clients pass on, there won’t be a queue of younger clients to take their place. Following are solutions to the age problem for the financial advisor. (For more, see: Money Habits of the Millennials.)

Consider offering an hourly consultation service. A less affluent client may be willing to pay several hundred on up to a thousand dollars for targeted and specific advice. By building this relationship, when the individual later needs more in depth help and services, you’ve already created a rapport.

Seek out the children of existing clients. It’s quite likely they’ll inherit their parent’s wealth and if you don’t offer them up-to-date services, they may flee to more modern, technology assisted financial advisory platforms. (For more, see: How Top Advisors Innovate to Stay Ahead.)

Invite younger clients to an event to show that you want and value their business. Use younger advisors in your firm to seek out their colleagues and associates. By catering to a younger demographic, you can round out your client portfolio to include this vital group. (For more, see: How Advisors Can Help Clients Leave an Inheritance.)

The Bottom Line

The traditional financial advisors have an age problem, and a short sighted view of their organizations. In order to set up their firms for longevity, they need to correct their focus on the older wealthy and turn their attention to younger clientele. (For more, see: Ways Advisors Should Evolve in 2015 and Beyond.)

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