In today’s fast-changing financial world, both client demographics and the role of advisors are shifting significantly. To ensure lasting growth and sustainability, advisors must recognize the huge potential in serving Millennial and Generation Z clients.
These younger generations make up a large part of the population and have considerable wealth. Financial advisors can secure their firm’s future success by embracing and meeting their unique needs and preferences.
Market Size and Potential
Millennials and Gen Z are quickly becoming the main demographic groups. According to the U.S. Census Bureau, these two generations already make up over 42% of the U.S. population. However, they represent only 14% of advisory clients, showing a significant gap.
As wealth moves from older generations to their heirs, Millennials and Gen Z are set to inherit an estimated $84 trillion through 2045, per Cerulli Associates. With 57% of current 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 actively seek next-generation clients are already seeing significant growth.
Understanding Millennial and Gen Z Preferences
Ignoring this significant market segment may cause advisors to miss out on substantial growth opportunities.
Nearly 65% of Millennial and Gen Z investors believe that a financial advisor is important for 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 their assets 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 key. 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 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 tap into a growing market. Are you ready to embrace this generational shift?
