Advisers Struggle to Gain Young Clients

Advisers across all channels are finding it increasingly difficult to attract young investors, says Kenton Shirk, an associate director at Cerulli, calling into question the long-term viability of firms that cannot adjust to the preferences of younger clients. The trend appears to be fueled, at least in part, by the growing availability of online advice resources and easy-to-use direct investment platforms, Cerulli says.  

In a recent white paper, “Advisor Metrics 2013: Understanding and Addressing a More Sophisticated Population,” Cerulli researchers suggest the emergence of electronic registered investment advisers (eRIAs) is among the most serious threats to traditional financial advice models. These investment advisers often forego face-to-face relationships for sophisticated online advice portals, Cerulli explains, through which clients can build and direct their own portfolios while receiving remote advice through call centers or directly on the web portal.

“The eRIAs are able to deliver scalable offerings at extremely low costs,” Shirk explains. “Advisers must understand that it will be nearly impossible to compete on price. To win clients in this market, advisers need to differentiate their offerings and deliver things that eRIAs cannot, such as sophisticated tax planning and long-term care advice.”

Cerulli encourages advisers to branch out beyond offering only asset allocation and retirement advice to attract new clients. If retirement specialist advisers can team with tax planning professionals, for example, they will be able to offer holistic tax and estate planning programs to clients, a significant value-add that will be difficult for eRIAs to match through online portals or call centers. Other subjects, such as long-term care planning and how to navigate the Social Security claims process, can also be addressed as part of more holistic wealth and retirement planning.

Overall, Cerulli anticipates a slow-but-steady migration of investor assets away from employee channels toward the more independent advisory models and direct distribution platforms. The ubiquitous growth of consumer technology has eliminated many of the hurdles that had limited growth of smaller practices in the past, Cerulli explains. The result is not only a wide variety of products becoming available to advisers in each channel, but technology developments have also greatly lowered the barriers to entry to the advisory space.

An adviser no longer needs a Wall Street pedigree to effectively run their business, Shirk says, instead an Internet connection and the trust of clients is sufficient.

Regardless of the advice delivery method, Cerulli says financial relationships are still rooted in trust and value. And while significant segments of the population are willing to use technology to augment their relationships, providers in all channels are finding that the personal relationships many investors have with their advisers are still a vital part of the wealth management and retirement planning industries.

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