Post RDR, they also need to demonstrate that it is worth paying for good financial advice. ”Demographics has been a key area of focus for Pershing, in particular the rise of the ‘millennials’ – those with birth years ranging from the early ’80s to the early ’00s.
While adapting a business to cater for the next generation of wealthy clients – and potential recruits – should be nothing new to a firm, Tibergien believes that wealth management has traditionally been a sector “built for baby boomers, by baby boomers”.
However, this age group are either dying, retiring or moving into withdrawal phase at a rapid rate. “In order for wealth managers to adapt, they must think both about their employee base and their client base and recognise the behaviours are different, the expectations are different and the approach to managing both are different,” he stresses.
“Boomers have a tendency to build a relationship then decide whether to do business with you. Millennials have a tendency to judge whether you are competent and may or may not decide to have a relationship with you. “Technology is only part of the shift –the way in which you report, communicate and serve is also critical. To clients, advisers need to position themselves as professionals. With staff, advisers need to be aware of the millennium mindset when developing the next generation of advisers.
Perishing’s own Digital Horizons report into demographics found 55% of investors under the age of 25 have switched financial providers in the past two years (see chart above), suggesting that wealth managers must deliver what younger clients want or risk missing out as they grow their wealth.
All change ahead
Looking ahead to the next five to 10 years, Pershing believes that wealth managers can benefit from looking beyond their traditional clients, segmenting the market and targeting specific groups. For example, social change means high-earning women are coming in as prominent investors.
Those that want to grow their business will have the opportunity to do this through acquisition as smaller advisers exit the sector. “Advisers can also grow their businesses organically, staying close to clients and potential clients, and managing their own client acquisition processes. For example, there will always be a need for advice around the time of life-changing events,” says Tibergien. “However, advisers will need to manage costs to maintain profitability, either by ongoing investment in in-house technology or by outsourcing to another company that invests in technology.
”The wealth management space post RDR has become incredibly crowded as IFA firms look to specialise in investment and compete with traditional discretionary managers, alongside fund groups with their multi-asset and multi-manager propositions. For Tibergien, the most successful firms will be, to put it simply, those that are specific about which customers they want to serve and why those clients will want to work with them.
“We think this will be firms that are very clear on market segmentation and targeting and proposition depth not breadth. It’s about being great for those customers they want, rather than average for everybody.” In keeping with Pershing’s proposition, he also recommends firms extend and further
