How RIAs are adapting to changing demographics

Independent registered investment advisors realize if they want to attract the next generation of clients and meet their needs, something has to change.

So says a new study from TD Ameritrade Institutional 2018 RIA Sentiment Survey, which finds that as boomers and seniors fall as a percentage of clients (from 46 percent to 43 percent and from 23 percent to 14 percent, respectively), GenXers and millennials will rise.

Currently the younger two generations make up 30 percent of clients, but RIAs expect that will rise to 41 percent in 5 years—27 percent of them GenXers, the other 14 percent millennials.

Currently RIAs’ chief plan for attracting younger clients is to change their marketing and networking strategies.

However, worried that there will be a substantial exodus of assets as boomers and seniors make their exit, 47 percent are also contemplating new pricing—whether flat fees, adding robo services or making some other adjustment—and nearly 40 percent are advising 401(k) plan participants; In fact, more than two thirds of RIAs are adding retirement planning to their repertoire.

In addition, more than one out of five are lowering asset minimums.

Asked about top competitive threats to growth, 43 percent identified wealth transfer to nonclients, while 22 percent said a lack of young advisors to hire is a problem. RIAs are definitely facing challenges in succession planning and in hiring, with 30 percent hiring younger advisors and 24 percent hiring college interns to meet those challenges. In addition, one out of five are planning on hiring mid-career changers and ex-military personnel and training them as well.

But that doesn’t mean all RIAs are being proactive about the changes waiting in the wings. A surprising 44 percent aren’t doing anything to build a talent pipeline, and 23 percent are taking no special action to attract younger clients, with 27 percent of respondents saying they have no strategy at all.

Adding in the other challenges lying in wait—technology, competition from other firms and the threat to cybersecurity were also mentioned among their top challenges—RIAs will be busy transforming their businesses, one way or another.