The advisor population closely mirrors their affluent clients—older, white Americans. But that is set to change as economic influence of minority groups, younger investors and women grow—and advisors who fail to adapt could lose. And female advisors may have an edge.
Compared to their male counterparts, female advisors are doing a little bit better in creating client diversity in their practices. According to Pershing’s "Investor of the Future" study released Wednesday, women are serving a higher proportion of other women, minorities and LGBT clients, as well as families with special needs.
Some of this can be chalked up to general wisdom that investors like to work with people similar to them. Almost a third of female investors choose a female advisor, while only 11 percent of male investors partner with a female advisor, study found. The same can be said of age and language.
But women advisors are also gaining ground here because they are more likely to be proactively visit business owners’ place of business and inclusive in their communications, activities that build trust and solidify relationships.
“As we see continued shifts in wealth and advisory services, advisors that align their businesses with quickly evolving client dynamics will ensure continued mutual success and growth,” says Kim Dellarocca, head of practice management and segment marketing at Pershing.
And advisors need to act now—approximately $12 trillion in assets is currently shifting generations. Additionally, over the next 30 years, more than $30 trillion is expected to shift, the study found. Although 84 percent of the over 300 advisors surveyed said they were prepared to serve Gen Y investors, only 35 percent have spoken with the client’s adult children about financial advice and investments.
But advisors should pause before rapidly diversifying their client base. Pershing found that over-diversification is not necessarily effective; instead advisors’ business is better when advisors focus on a few key groups.