Advisers should increasingly focus on Gen X and Gen Y clients but targeting this market may require a business rethink, a Colonial First State executive has said.
Addressing the AFA’s recent GenXt roadshow, CFS executive manager Fintan Thornton said advisers should focus more on younger clients as their existing clients age and industry funds pose a growing threat.
“You've got an ageing client book and with advice fees based historically on assets, that becomes a problem when it's difficult to replace those clients,” he said.
“In addition, there will be a lack of new clients or it's going to be harder to engage those clients because of the work the industry funds are doing.”
He cited figures from Investment Trends showing Gen X and Gen Y account for nearly seven million Australians and hold 36 per cent of net household wealth.
“The prize is significant if we can get this right,” he said.
However, he warned advisers that many younger clients were resistant to comprehensive advice, with just 50 per cent indicating a willingness to pay for such services compared to 70 per cent of retirees and pre-retirees.
“They're looking for more transactional, one-off advice. The challenge, is how do we, and you, set business models that are reflective of that?” Mr Thornton said.
He suggested scaled advice tends to be inefficient for advisers but such clients could eventually transition to broader services.
As such, he encouraged advisers to emphasise how they could help younger clients meet their goals.
“Almost regardless of the age of your client, sit down with them and engage them in the process of unearthing their unmet needs,” he said.
In addition, he said younger demographics placed a high importance on trust when choosing an adviser.
“Your secret sauce, your key differentiator, is that you can build trust, rapport and engagement. An online tool cannot do that,” he said.
Given these trends, he suggested young advisers at a similar life stage to their clients were particularly well placed to target newer generations.
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