The US Wealth Advisor force is nearing retirement with 43% of US financial advisors over 55. This wave of transitions poses a formidable challenge for wealth management firms, but also an opportunity to reshape the business with new more relevant skills.  The convergence of events around labour supply and market demands offer a unique moment in the global wealth management history for those that are prepared to take the strategic initiative and forge a new experience.

Retirements have increased 57% between 2010 and 2013 and will continue to grow as baby boomer advisors approach 65. In the meantime, the growth of the labour force in the US as a whole is expected to slow to only 0.5% between 2012 and 2022 and as the supply of labour falls behind the growth of wealth, Wealth Management skills that cannot yet be substituted by computers, will be in great demand.

The labour force scenario means fewer qualified advisors will be available to support a growing pool of wealth that is itself transitioning between generations. As a result, firms are now faced with solving how to service and retain senior clients who tend to be similar in age to their retiring advisor, while simultaneously positioning the firm to succeed with the clients’ children – the beneficiaries of enormous wealth transfer. 

This context means that it is imperative wealth management firms conduct workforce planning that factors in expected value proposition development, the impact of new technology on roles and productivity and expected staff transitions, to prepare a plan now to build the talent necessary to capture the wealth management growth opportunity of tomorrow. What firms should certainly not do is merely replace retirees with like for like skills that won’t be appropriate in the future. Yet this is exactly what most wealth management firms are currently doing.

At many firms, the principle approach to advisor transitions is multi-generational teaming and sunset agreements to ease in a new advisor as a legacy advisor retires. However, this approach is FC centred and not client-focused. Wouldn’t it be better to ask, “Which of the firm’s advisors are best suited to the needs and preferences of this client?”

Teaming is effective at developing new talent and smoothing the transition to a new advisor, but doesn’t necessarily result in the best advisor for the client.

Indeed, the client is already a helpful guide in the development of the new model advisor.  Research from our recent Futurewealth study, shows that while all age segments rank Integrity, professionalism and intelligence as the top three qualities of an advisor, millennial investors place a higher emphasis on creativity, patience, sociability and empathy [Figure 1].

But despite valuing these ‘softer’ skills, younger clients can also be highly demanding and want to be involved in investment decision-making, which can stretch the skills of less experienced advisors.  To generate new commercial engagements the key will be to focus on these skill attributes during talent development.

Figure 1: Younger clients want advisors to be patient, with a spark of creativity


next gen HNW clients


Meanwhile, when we asked HNW individuals how many times they’d had contact with their relationship manager (RM) over the last 12 months, clients aged 60 and over reported 6.9 interactions. Those under 40, meanwhile, enjoyed more than twice as much contact, reporting 14.7 interactions. The contrast grows starker still when it comes to consulting specialist experts. Clients aged 60 and over reported just 1.7 interactions per year compared to 10.9 amongst those under 40 [Figure 2].


Figure 2: The needs and preferences of millennials

older vs. younger HNW client preferences


The insight suggests that younger clients take a rigorous approach to reviewing every detail of their portfolio. Whilst 57% of clients aged 60 or over are happy for their RM to only discuss relevant changes and developments when they interact. Only 32% of those under 40 found this sufficient, the balance preferring to review each and every element of their financial position. Finally, almost one in four younger clients (23%) want a RM to mentor them, something just 8% of those aged 60 or over desire. [Figure 2]

As older clients live longer and younger clients get rich quicker, the client universe is becoming more diverse. Arguably, it’s also becoming more promiscuous. 41% of clients under 40 would consider moving assets if their RM left, compared to just 12% of those aged 60 or over. Boosting loyalty at the firm level must become an urgent priority, but this depends on finding ways to deliver segmented propositions closely aligned with client preferences [Figure 2].

In reality, clients might be happiest and advisors most efficient when clients are paired with an advisor specialized in their segment. However, in a world where the advisor in practice owns the client, firms can facilitate client transitions from one advisor to another by creating a virtual client bank. Firms could then offer clients of transitioning advisors a selection of suitable advisors. Giving clients an opportunity to select their advisor in this way would certainly improve client buy-in and ultimately retention.

At a minimum, firms should at least train advisors to better adjust their service model to respond to client needs and preferences. A graceful transition is exceedingly difficult to achieve, but if done well, is an opportunity to re-engage with clients and their family.


News from the world of wealth:

RBC in advanced talks to sell its Swiss private bank to Banque Syz (Globe and Mail)

UBP to eliminate up to 160 jobs after Coutts International acquisition (Yahoo News)

Citigroup planning to double wealth-management clients in Asia (Wall Street Journal)

UAE signs FATCA deal with US (Gulf News)

Lloyds Private Bank launches London Expat Service (Lloyds Banking Group)


Thought of the week:

“The trouble with retirement is that you never get a day off.” – Abe Lemons


Coming events in the world of wealth:

wealth management forum


Peter Keuls McLagan and Scorpio PartnershipAuthor: Peter Keuls, Partner, Global Head of Wealth Management at McLagan and Scorpio Partnership.

Expertise: Peter advises leading wealth management firms on performance and pay optimisation through client experience improvements that enhance sales effectiveness and productivity improvement. He also consults on firm economics, cost reduction, branch distribution effectiveness and incentive plan design.

Background: Prior to joining McLagan, Peter was at Merrill Lynch where he was the Director of Marketing Strategy and Planning in the International Private Client group.


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