Change is the one constant we can all count on right now and this certainly holds true in financial services. As we emerge from strict quarantine restrictions due to COVID-19, it isn’t just how we work in the financial services industry that has changed, it is who we are working for that is on the verge of a major shift. Pre-crisis, the key customer base of the typical financial services professional was an affluent baby-boomer whose main financial goal was a combination of securing retirement and ensuring a reasonable inheritance for their children. Post crisis, the typical customer of a financial services professional is not so clearly defined as the financial turmoil of the last few months have put all age demographics on edge when it comes to their economic plans, Therefore, as an industry, it can be expected that in the coming months the typical customer of a financial services professional will not be so typical as more young people who are now anxious about their financial stability will be joining baby boomers in seeking the informed council of financial advisors.
It is important to note, when considering the changing client demographics for financial services, shifting and diversification of the client base should not be seen as a negative within the industry. In fact, it can be seen as a distinct bright spot during otherwise murky times. There will be great upside for financial advisors who are able to assimilate to the changing customer demographics of the industry and integrate the right product service mixes into their business plans to address a more varied level of client needs. Analyze the statistics for each project client demographic in financial services and this picture of the future becomes clear.
According to an Investopedia study, 46% of the millennial financial services client base feels they are investing enough to secure a solid financial future, while only 37% of that same demographic sector feels knowledgeable about financial services. Further, in a Charles Schwab 2019 Modern Wealth Survey, the average millennial defined wealth as a personal net worth of $1.9 million. What this data tells us is that millennials are eager investors who are open to seeking counsel as to the right plans and strategy for securing their financial future. It can further be deduced that those financial services professionals who are able to show a mix of investments with varied risk potentials while incorporating a long-term vision of security through financial product diversification will be best poised to serve the needs of and capitalize on millennial market potential.
Next consider the Gen-X generation, where the data shows an even more compelling area of growth potential for the financial services industry. The same Investopedia study notes that Gen-Xers are an untapped market for the financial services industry set to lead the nation in wealth by 2030, which a Forbes study also supports – noting that Gen-X is projected to represent a combined $23 trillion worth of financial assets at the 2030 benchmark. Gen-X investors are extremely risk tolerant. They are also active and involved consumers who use technology to research and inform their buying decisions. Financial advisors targeting the Gen-X demographic will only be successful when they become adept at merging successful asset management with maintaining real-time customer facing data through dynamic CRM technology platforms. Additionally, a comprehensive marketing image for both the firm and advisor becomes an imperative for those seeking to serve the Gen-X customer as this demographic relies heavily on websites, social media, and news feeds to inform their buying decisions.
However, the enticement of the bird in the hand is hard to resist when it comes to financial services and this certainly holds true with the baby-boomer generation. The baby boomer generation is a known client entity whose influence is not going anywhere fast. Baby-boomers are currently the wealthiest generation to the tune of an average household net worth of $1.2 million according to a CNBC study. Encompassing those individuals in the U.S. population between 56 and 76 years old, the baby-boomer demographic represents the most typical financial services client with which an advisor is accustomed to dealing with. Face-to-face meetings, a risk averse asset mix, and a long-range view of financial planning that leads to a secured retirement remain the keys. This is not to say it is a ‘same as it ever was’ situation when it comes to baby-boomers. According to a Pew research study more than 68% of baby-boomers currently own a SMART technology device and are showing consistent double digit gains in their use of social media and Internet technologies. Thus, it can only be assumed that given the recent turmoil in the markets and increased comfort level with technology that quarantine situations have created for all of us, that baby-boomer clients will be turning online in the weeks and months ahead to do the research which will inform their conversations with their financial advisors.
The key take-away for financial advisors when looking at emerging client demographics is diversification. It’s the same message advisors have been giving their own clients for years and it is advice they should take themselves right now. Diversify your product and service offerings. Hone your marketing message on both a personal and firm level and make sure it is reflected online. Embrace new technologies and stay at the bleeding-edge in your knowledge base for tech advancements in the industry. Your ability as an advisor to be as dynamic in your expertise as your emerging clients are dynamic in their varied needs and perspectives will be the vital component that allows you to excel in the financial services industry yet to come.