Your clients are under attack. At least, if they fall into the baby boomer category they are. Not physically, of course, but their perceived wealth and good fortune is a cause for increasing resentfulness among younger people.
Baby boomers are widely regarded as the golden generation, with healthy pension pots, properties bought for a song, plus more freedom and health to look forward to in their later years than anything experienced by their parents and grandparents.
The affluent baby boomer is every adviser’s dream client, with money to invest, pension management to be planned and inheritance tax to be mitigated.
By comparison, the millennials (broadly those aged 16-35) are portrayed as struggling to find well-paid jobs and as having mounting debts fuelled by the increased cost of university. They see little hope of getting on the property ladder until much later in life, if at all. They feel in crisis financially and have a growing resentment for the riches they perceive their grandparents’ generation enjoy.
Why is that a problem for advisers? I believe if qualified advisers direct their skills solely at those who already have wealth there is a real risk those younger people currently struggling to juggle their finances will never engage with the notion of taking advice. They will find alternative ways to manage their financial affairs that will stay with them as they age and, hopefully, become better off.
In the meantime, the pool of aging baby boomers will inevitably diminish, making it increasingly challenging for advisers to build their businesses around these relatively affluent individuals.
There is another group at risk of falling through the cracks of a business strategy purely focused on wealthy clients: the 35-50 year olds categorised as generation X.
As with the millennials, this group does not have the benefits and good financial fortune their baby boomer parents enjoy but, for a significant number, they can expect to inherit estates that will make their finances much healthier. A key source of future financial gain for generation X will be the property they inherit, as well as the fruits of all that IHT planning their parents have done.
With financial challenges in terms of mortgage and debts, it is a reasonable assumption many of those who inherit property will look to realise the equity tied up in it and will require good advice about how to invest the proceeds wisely.
But while generation X offers potential future business, their debts and lifestyle needs mean it is unlikely they will ever have the same degree of affluence of the baby boomers.
With the younger generations on the whole strapped for cash and debt ridden, it is no wonder advisers are prioritising affluent, generally older people as key targets for advice. However, advisers can broaden their pool of potential clients cost effectively and in a way that will appeal to future generations.
The digital revolution is not just changing the way we receive and exchange information; it is creating opportunities to evolve businesses, offering services to a more diverse client base at a lower cost.
In the US, the march of the digital revolution is already putting traditional advisers under threat, with growth in the use of robo-advisers: online services offering automated simplified advice. It is a trend that threatens to catch on in the UK, particularly among people who cannot either afford or find qualified advisers who will see them, or who prefer to manage their affairs via a mobile device or laptop.
For UK advisers wanting sustainable, long-term business success, the time is right to review and adapt working models to embrace a mix of automated services alongside the personal approach. Through segmenting clients by their wants and means, and tailoring services to match, including the fees charged, advisers have the opportunity to offer clients the best of both worlds.
With the right technology in place, it is feasible to actively seek out generation X and millennials, perhaps via existing baby boomer clients with children and grandchildren facing challenges juggling their finances.
Offering low-cost, automated solutions to the offspring of clients, even if it is to manage debt rather than grow investments in the short to medium term, should be popular. It also means you will be actively engaging with those who risk becoming lost generations for the advice sector in years to come.
Nick Eatock is executive chairman at Intelliflo