In today’s rapidly evolving financial landscape, both client demographics and the role of advisors are undergoing a significant shift. To ensure long-term growth and sustainability, advisors must recognize the immense potential of serving Millennial and Generation Z clients.
These younger generations represent a substantial portion of the population and possess considerable wealth. Financial advisors can secure their firm’s future success by embracing and catering to their unique needs and preferences.
Market Size and Potential
Millennials and Gen Z are quickly becoming the dominant demographic groups. According to the U.S. Census Bureau these two generations already represent over 42% of the U.S. population. However, they represent only 14% of advisory clients, demonstrating a significant gap.
As wealth transitions from older generations to their heirs, Millennials and Gen Z are set to inherit a staggering amount – an estimated $84 trillion through 2045, per Cerulli Associates. With 57% of existing client assets expected to pass to the next generation, capturing a share of this wealth transfer will be crucial for the long-term sustainability of advisors’ businesses.
According to Fidelity Research, firms with a younger client base are growing nearly ten times faster than their peers, indicating that those who proactively seek next-generation clients are already seeing outsized growth.
Understanding Millennial and Gen Z Preferences
Ignoring this significant market segment may lead to advisors missing out on a substantial growth opportunity.
Nearly 65% of Millennial and Gen Z investors believe that a financial advisor is important to achieve financial success, a sentiment heightened by current economic uncertainty, compared to just 56% of Baby Boomers. Not only are they more inclined to use a financial advisor, but they are also more likely to bring a larger share of wallet to that relationship as 66% of Millennials and Gen Z want to consolidate more assets with their primary advisor, compared to 19% of Baby Boomers.
For these generations, personalization is de facto. When finding the right advisor, they value comprehensive, whole-life advisory experiences that go beyond traditional investment advice. They seek tailored solutions that address their unique goals, aspirations, and values.
Relationship-driven, these generations appreciate guidance on financial decision-making, and 85% would specifically like some form of behavioral coaching as a form of support and accountability.
They also have different goals regarding the impact of their investments. In fact, 55% believe that having values-aligned investments is more important than getting maximum returns, and nearly 75% of Millennials consider themselves philanthropic.
Younger generations approach finances with different motivations, values and goals – and need their wealth management experience to reflect that individuality. By 2030, up to 80% of new wealth management clients will want advice in a “Netflix-style” data-driven and hyper-personalized model.
Given that Millennials and Gen Z are digital natives, they often expect seamless integration of technology in their financial lives. Embracing client-facing tech will be crucial for engaging and retaining younger clients with meaningful, personalized experiences.
Recognizing the potential of these demographics, understanding their unique preferences, and tailoring services accordingly will enable advisors to unlock a growing market.
Are you ready to embrace this generational shift? Learn how TIFIN Wealth can help by scheduling a guided tour of our platform for organic growth.