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Next Gen Investor
The Future of Your Practice Is in the Hands of NextGen Investors

The Future of Your Practice Is in the Hands of NextGen Investors

Succeeding with NextGen clients requires advisors to understand the attitudes and behaviors of Gen X/Y and where they need help.

Many advisors have built successful businesses by catering to the financial needs of baby boomers, but those clients are heading into retirement and switching their focus from accumulating assets to liquidating them. In order to keep their businesses vibrant, advisors need to prepare for what comes next and have a plan for replacing that lost revenue from managing that shrinking pool of assets.

In order to understand the gravity of the situation, one need only look at our nation’s changing demographic profile. According to a KPMG study and U.S. Census data, America’s population in the 40-to-59 age range, the prime accumulation and investment years, grew 15% between 1990 and 2005. By contrast, in the 15 years leading up to 2020, the population in this accumulation age range is expected to grow by only 1%.

This means that in the years ahead, advisors will have to attract more accumulation-phase investors from a smaller pool. It also means that competition for Gen X and Y clients will be intense. Advisors who start laying the groundwork now for attracting this demographic will be in a much better position to compete in the years ahead.  

And there’s no reason not to court the adult children of current clients now. As a group, Gen X and Gen Y are considerably more attractive than many advisory firms give them credit for. These two demographics total approximately 130.6 million individuals, which is about double the number of boomers, with spending power of $2.6 trillion and a projected net worth by 2018 of $28 trillion. Although many millennials are not affluent yet, they are in a position to become so in the coming years. Forrester Research projects that cumulative earnings of Gen Y will increase by 85% between 2007 and 2017, surpassing those of baby boomers by as much as $500 billion. Already 20% of millionaire taxpayers are between the ages of 26 and 45.

In addition to still having their highest earning years ahead of them, these younger generations are poised to inherit significant assets. Baby boomers are expected to pass on over $40 trillion worth of wealth by 2052, and this represents the gateway to continued advisory firm growth over the next 20 years.

Of course identifying a target client group is only the first step. Advisors will still have to work to earn the business, and the trust, of NextGen clients.

One way to do this is to get involved with them early, ideally by asking current clients to include their mature children in financial discussions. Far too often, wealth generators don't involve their adult children in financial matters early enough, and the first time children get together to talk about the family wealth is when their parents die. If their family’s advisor is a stranger who has never taken the time to get to know them or shown an interest in their future, there is really no incentive for the heirs to continue the relationship. Advisors can never assume that just because their current clients have money that their children know anything about it or have any level of involvement.

The time to start engaging with younger generations of investors is well before they inherit their parents’ wealth. When that moment ultimately arrives, the heirs will be looking for advice and counsel from someone they already know and trust.

Serving the family unit and regularly engaging all members does more than merely serve to mitigate the risk of the clients’ children finding a new advisor. Having robust family relationships provides access to the networks of younger contacts clients and their adult children have.

This calls for an approach that leverages other relationships these investors already have established with their parents, as well as older colleagues and long-time family friends. Gen X and Gen Y investors increasingly and commonly rely on parents or friends for financial advice. These existing counselors are your allies in forming relationships with NextGen prospects. Even if current clients do not have children or wish to define their financial goals around providing for them, they may nonetheless offer access to networks of their younger mentees or friends’ children that the advisor might otherwise not be able to access.

It can be difficult for advisors to reach Gen X and Y investors directly, but it helps to speak their language. NextGen investors have grown up with technology and expect their advisors to be able to speak with them on the platform of their choice. They use Twitter or texts and value clarity and simplicity in all their communications, including financial ones.  And they are much more concerned about the social and environmental impact of their investments than previous generations.

Succeeding with NextGen clients requires advisors to understand the attitudes and behaviors of Gen X/Y and where they need help. It’s important for the advisor to craft a compelling story about why and how he or she can effectively serve them. Make sure that story is present in every client touch point, including websites, blogs, client communication pieces and case studies. And lastly, advisors need to be prepared to address the issue of fees and the true value that their services provide.



Matt Matrisian is Senior Vice President, Practice Management & Strategic Initiatives at AssetMark, Inc. (, an independent provider of investment and consulting solutions serving financial advisors, and author of “The Power of Practice Management: Best Practices for Building a Better Advisory Business.”

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