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Future Client Generations

Cherry ReynardCherry Reynard offers a series of business briefings, looking at some of the key ways advisers can improve their business proposition, whether through generating referrals, making effective use of social media or building professional connections.

Affluent baby-boomers have provided a solid client base for financial advisers over the past two decades. Often mortgage-free with large pension pots – and, in some cases, final-salary pension schemes – they tend to be receptive to expert advice about their finances. However, advisers have to adapt to a new breed of client. 

  • Financial advisers are likely to find “Generation X” and “Generation Y” rather more of a challenge
  • Although "Generation X may benefit from some inherited wealth, they are generally time poor and likely to be less financially secure than their parents
  • Meanwhile, tech-savvy Generation Y wants maximum flexibility and has no expectation of a job for life

Baby-boomers have been the bread and butter for financial advisers for the past two decades. Many of them are now retiring with luxuries such as final salary pension schemes and pots of cash that need investing – and, as such, are likely to continue to seek advice. But within 10 to 15 years, the next generation – Generation X – will form the core of any client base and those advisers looking to the future will have to adapt to their needs.

The baby-boomers – those born between 1946 and 1964 – are relatively predictable in their habits. They tend to have worked hard, own their own homes and have savings, pensions and investments. They will usually have stuck to one stable career and are now looking forward to a retirement of lengthy holidays and afternoons on the golf course. They believe in authority, take advice and, as such, are model clients for financial advisers.

Generation X are a trickier bunch on a number of levels. Also described as the ‘me generation’, they tend also to be the most squeezed. They are often caring for elderly relatives, while at the same time looking after young children. Their jobs have been far more insecure, with many seeing several career changes. Even those who have something to save do not tend to be natural savers though, unlike the baby-boomers, they may have some inherited wealth.

This all has an impact on the way they want to receive advice. They are more time-sensitive than the baby-boomers. They work longer hours. They are likely to be more technically literate. This means that spending six weeks waiting for a portfolio valuation from an insurance company will irritate them far more than it did the previous generation.

But if this is true for Generation X, it is even more so for Generation Y. They will be technically literate and do not have to wait for information in any part of their lives. The concept of a job for life has disappeared. They want flexibility in their employment – or self-employment. Ultimately employers are having to bend to meet their needs. Financial advice will have to do the same. Meeting an adviser at their office at 10am on a weekday may not appeal, while doing a factfind online would be second nature.

This generation is also seen as more idealistic and the financial services industry may have to work harder to meet their more exacting ethical standards. Ultimately, advisers are going to have to provide something over and above the information such people are able to find online.

They need to help them negotiate this information rather than simply disseminate it. Ultimately, some advisers may simply be relying on the baby-boomers to see them through to the end of their careers but, for those looking to build an enduring practice they can pass on, adapting it to the next generations will be vital.

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