Take a look around: the faces—and needs—of the affluent population are changing. Greater diversity, emerging sources of wealth and other new dynamics require advisors to keep up. How can an advisor avoid becoming obsolete? To attract and retain the most valuable affluent clients in the coming decades, advisors need to recognize the changing dynamics of affluence and adapt accordingly. A report issued by Pershing LLC, Investor of the Future: The Quest for Tomorrow’s Affluent Clients Starts Today, is based on a study commissioned by Pershing and offers a glimpse at what today’s affluent client base looks like, gauges advisors’ perceptions of the broader market and predicts which clients may be most influential in shaping advisors’ businesses in the future.
Before we shift into the future to understand tomorrow’s client opportunities, it is important to understand what today’s affluent clients look like. In trying to capture a clear picture of these clients, we learned that advisor perceptions are not always aligned with reality.
Advisors overall believe that their affluent clients skew significantly more Caucasian, are somewhat older and are much more likely to be married compared to the broader market. For the most part, our research corroborated that view: Advisors’ affluent client base does skew somewhat more Caucasian (84% of clients vs. 82% of the market) and is markedly older (60% of clients age 55 and older vs. 35% in the actual affluent market). Yet, surprisingly, marriage is more prevalent among clients in the broader affluent market than among advisors’ affluent clients (82% in the market vs. 65% of clients).1
There is one additional major gap between advisor perception and reality. Business owners are dramatically overrepresented in advisors’ client bases—a stunning 37% vs. 4% in the actual market. Yet, advisors believe that there are many other business owners in the affluent market (average estimate of 59%)—signaling their potential pursuit of an “untapped opportunity” that may, in fact, have no foundation in reality.
On the other hand, advisors appear to be accurately attuned to the fact that their client bases feature less ethnic diversity than the broader market. In particular, affluent clients of Asian and Hispanic/Latino heritage are underrepresented among the client bases of advisors.
Advisors also are alert to the potential of clients who fall outside the larger affluent investor segments. They view the lesbian, gay, bisexual, and transgender (LGBT) population as an attractive opportunity, for example, as well as families who have complex needs due to special needs dependents. Gaps between perception and reality may indicate that advisors either find certain segments particularly attractive as business opportunities, or that they simply imagine the needs in these segments to be more acute.
Pershing’s Investor of the Future: The Quest for Tomorrow’s Affluent Clients Starts Today offers an eye-opening reality check, comparing advisors’ current clients and market perceptions with actual U.S. Census data on rising affluent populations.
This blog is courtesy of Pershing LLC, a BNY Mellon company, an FSI Ambassador Sponsor.
1 Unless indicated, all data in the study is based on survey results conducted online from February 14 to March 1, 2013, among U.S. advisors at least 25 years of age, sampled from the Harris Interactive Panel of Financial Advisors.
Financial Services Institute 