How can advisers boost fee income from younger clients?

Millennials and Generation Z earning over £50,000 a year are actively engaged in saving, long-term financial planning and inheritance planning, according to a new report by TIME Investments.

Its survey found that the two age groups are financially savvy but very much open to advice and are likely to seek help at a relatively young age, offering an important business opportunity for wealth managers and financial advisers.

The study shows that 56% of respondents use a professional financial adviser or wealth manager and this is being driven by the need for help when it comes to choosing the best savings and investment vehicles, as well as retirement planning as they embark on their long-term savings journey.

When asked at what age they expected to engage with professional financial advice, there was an expectation across all respondents that this would happen sooner rather than later, with 28% of respondents starting to use an adviser aged between 26 and 30 years old, 20% between 31 and 35 years old and 13% between 36 and 40. A minority of just 4% said that they would be over 50 by the time they sought advice.

Majority of advisers have a strategy in place to boost fee income from younger clients

Research with advisers shows that annual fee income from clients aged 40 and under remains a relatively low portion of overall revenues. The majority of advisers (85%) said that less than 50% of their income currently comes from clients aged below 40, highlighting their dependence on older generations.

However, the good news is that the findings show that advisers are tackling this head-on, with 69% saying their firm has a strategy for targeting Generation Z. Many are taking steps to make their services more relevant to younger audiences by embracing new technology and providing new services: 71% are investing in new technologies; 50% have developed a low-cost offer; 50% are implementing a social media marketing strategy; 45% are providing new services such as business advice; 45% are making use of new comms channels such as WhatsApp and Facetime, and 41% are improving their focus on ESG.

But is this enough? It’s not just about managing the funds these clients currently hold, as over 60% of those surveyed expect to inherit money from their parents and families. When considering this intergenerational wealth transfer, only just under half of those surveyed have an existing relationship with the financial adviser that currently looks after the assets that form the inheritance.

Of those without an existing relationship, 28% don’t expect to stay with the financial adviser who currently looks after the assets and 26% don’t know what they will do. This poses a huge risk for advisers and highlights the importance of building a good relationship with the next generation early on to protect assets under management.

Tom Mullard, business line director at TIME Investments, said: “Our research shows that younger age groups are very much open to financial advice and are likely to seek help before they are 40. This provides a very important business opportunity for advisers and wealth managers, particularly those that have a strategy in place to develop this client base through improved technology and new services.”