Within the financial advice sector, there is an increasing focus on recruiting younger advisers into the profession in order to provide succession to increasingly ageing advisers. Not surprisingly, older advisers tend to relate to older clients and connecting with a much younger generation is not as easy.

    Generally, advisers’ clients who are in their fifties and older benefited from much more stable careers and career progressions. They learnt the disciplines of saving from their parents and as a post-war generation, they grew up with savings accounts with the Post Office and the local mutual building society or bank. They were also not subjected to today’s multi-media, multi-channel marketing maelstrom frenzy to buy or upgrade to the latest piece of consumer tech.

    Society is becoming rightfully concerned at the extremely low levels of savings held by a large percentage of those in their thirties; and then there the inability of younger generations to get on the housing ladder due to lack of savings. Of course, the pathetically low return on savings has destroyed any incentive or motivation.

    One of the interesting aspects of my role involves the compilation of stats out of the Harbour investor suitability system.

    Although Harbour is essentially a system designed to support advisers within a regulatory compliance environment, Harbour also captures demographic information that is number-crunched to provide firm owners and manages with data intelligence about their business. One of these is client age demographics.

    Aggregated across all firms using Harbour, the demographic spread of the ages of investment clients is stark:

    • well over half of clients (56% ) are in the pre and post-retirement 50-70 age range
    • 22% are in the later retirement age range (71+);
    • only 22% of invested clients are below the age of 49;
    • those under the age of 30 make up for less than 5% of investors.

    If these statistics are valid for advice firms across the UK, then it suggests that firms are either not seeking out investors under 30 years of age, that this audience hasn’t got money to invest or, that they do not need or are not seeking advice.

    One of the challenges for advice firms is the compatibility of firms’ fee structures with this younger and less affluent audience. Firms’ business models and cost bases are very much geared towards where invested wealth currently lies which is in the 50 to 89 investor age range. Increasing life spans combined with rising end of life care costs means that many advice firms are locked into a dying market – literally.

    For owner managers of very small advice firms seeking retirement, there are few options so the route is fairly clear: a business sale to a larger acquisitive firm or consolidator. For larger firms with plans to grow their customer base, seeking out new business with younger investors is vital to business sustainability and long term owner and shareholder value.

    Advice should always be an education process; clients need and value sound advice that helps them make informed decisions and grow their wealth. This is even more valid for those in the sub 40 age ranges. No, it won’t be as profitable as servicing older clients with larger amounts of wealth and neither will it be easy; and, it will demand the recruitment and development of younger advisers who can ‘connect’ with this younger audience targeted by consumer advertising.

    However, by using a combination of market analysis, audience segmentation and sound business management supported by the insight available from at-the-touch-of-a-mouse business intelligence, advice businesses will increase the sustainability and value of their businesses. You never know, you might even gain the gratitude of government; however, I wouldn’t count on it!

    For more detail on Harbour’s analysis of investor suitability dynamics and age profiles, click on the following link: https://www.harboursa.com/_docs/harbour-insight-2016-09.pdf

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