October 12, 2010
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The financial advice industry faces a perfect storm. The last two years have been marked by most disruptive financial turmoil in our lifetimes, causing many investors to lose confidence in the financial services industry or look for different financial solutions. Our primary client base, baby-boomers, is quickly sliding into retirement, leaving us to question where our growth will come from. And now we have the uncertainty surrounding the Dodd–Frank Wall Street Reform and Consumer Protection Act and the anxiety that comes with it.
Financial advisors can choose to see the convergence of these three factors as a threat to their well-being or as an opportunity to prosper. To paraphrase William Faulkner, financial advisors who evolve their thinking and their business models will not merely endure, but prevail.
Economic turmoil
Now more than ever, people need help and guidance, not just with their investments but with their overall financial lives. In a time when many investment products have delivered negative or negligible long-term returns, clients are no longer focused on whether a fund outperformed the S&P 500 by 200 basis points last quarter. Many clients are burdened with debt and their depreciated homes, face skyrocketing college tuition and healthcare costs, and are unsure about what the future holds for them. They’re looking for advice and cost-effective solutions that can help them address these serious financial threats. Financial advisors need to refocus on understanding their clients' current financial challenges.
Think beyond the baby-boomers
Demographics are shifting. Our golden goose of recent decades, the baby-boom generation, is quickly advancing into retirement. While baby-boomers still need financial advice, they may need less of it, they are becoming less aggressive when they get it, and their situations may not be very dynamic. Baby boomers may recall the famous “Where’s the Beef?” commercials, but their financial advisors are asking, “Where’s the growth?” The answer is Generation X, those Americans born between 1964 and 1980. They are the next growth segment for financial advisors.
What worked with the baby-boomers, however, is not what will work with GenX. While your baby-boom clients want to sit across the desk and talk with you face-to-face, your GenX clients are generally more comfortable with technology and think of the Internet as an extension of their lives. As the original latchkey kids, they are self-reliant and tend to be risk takers.
Generation X offers a particularly attractive opportunity for brokers and asset managers. They may not yet have a lot of investable assets, but they are in growth phase of their lives. At first glance, they may not seem very attractive to advisors, because they do many things on their own. Many may be willing to use technology to enter personal data, plan for their financial goals, and play with different what-if scenarios. They do not necessarily need the advisor for education and awareness, but they still need advice and guidance on financial decisions.
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