Acquiring the Young Investor as Your Client

I recently came across an interesting article discussing a current trend occurring in the investment advisor business arena. In short, the article warns advisors who have practices consisting mostly of either wealthy baby boomers on the verge of retirement or in retirement; “… the retirement-age population is expected to rise to nearly 20% of the U.S. population by 2025, according to Census Bureau projections, and they demand more service from their advisors…”. Wow, 20%.

So, what are some of the facts about retirement-age investors and what does it mean from an advisor practice management standpoint?

1. Investors in the retirement-age population require more attention. This impacts and potentially changes the way an advisor spends their time. How can advisors create value for this type of investor while growing their practice?
2. Retirement-age investors tend to be more risk-averse with their money restricting the amount of lucrative product an advisor can sell
3. Let’s not forget the increasing trend in fee-based advisors vs. commission-based advisors which has also affected the industry and the way advisors generate income.

In short, if you believe points 1 to 3, there’s a clear case to state that having a book consisting mostly of the retirement-age or on the brink of retirement-age is not a good thing if you want a book that grows or a book you can sell.

I’ve been in many presentations, calls and face-to-face meetings with advisors and I hear the phrase, quite often “I don’t need to be online, my clients are older and don’t use the internet”. Apart from the fact that there is research to support that our aging population is increasingly visiting websites and using social media, there is yet another reason why being online and digitally connected should be top of mind especially if you have a book consisting of retirement-age or near-retirement-age investors.

Advisors with this book profile need to start seeding their books with younger investors. This will not only positively impact the longevity of the book but it will also affect the long-term viability and most importantly, the valuation of an advisor’s book when they decide to sell.

So, the moral of the story?

Having a book trending towards a composition of mostly retirement-age investors affects the valuation and long-term growth of the book and therefore, acquiring younger investors becomes an important strategy to counter that trend.

Attracting younger investors isn’t going to be a walk in the park. Advisors need to exist where they look for things, which, last time I checked, has been predominantly online.