Capturing the

Hitting the target A diverse and flexible approach is key to capturing the “wealthy of the future.”

With affluent baby boomers continually attracting the lion’s share of attention from both the media and the financial services industry, the generation behind them – commonly known as Generation-X – remains a largely untapped opportunity for advisors.

“There is a trend in the industry to only work with clients who have already acquired a minimum net worth, and that eliminates this up-and-coming group,” says Sandra Foster, founder of Headspring Consulting. “Advisors owe it to themselves to consider how to bring the wealthy of the future into their practices and under their wings.”

Foster says that Generation-Xers sometimes enjoy certain advantages over their baby boomer counterparts – they often are double-income couples and some have capitalized on buying houses at extremely low interest rates. “I do not believe that this group is as highly mortgaged as their parents were when they got into the game, so I think that they do have some discretionary income that may be an opportunity for advisors who are looking for money to invest,” says Foster.

Working with this younger generation is not without its challenges. Foster notes that advisors will have to be prepared to work within differing family structures and must find a fresh approach besides the standard “saving for retirement” one. “It’s about making smart money decisions, so you might look at things like how they can pay down their mortgage faster, how they can be more tax effective and how they can build a nest-egg,” says Foster.

And citing her firm’s 2002 Financial Advice in Canada study that showed less that 30% of advisors in Canada are under the age of 40 and 2% under the age of 30, Foster adds that it can’t hurt to try to stay current with technology and trends when dealing with Generation-X.

According to a survey released last summer by New York Life Investment Management, 66% of respondents between the ages of 23 and 35 said they did not have a financial advisor, yet 72% believed they needed a financial plan. The average annual household income of the survey respondents was $109,700 US, while the average net worth was $117,000 US.

Although this particular survey may have used an elite sample of Generation-Xers, one Toronto-based expert agrees with the assertion that this age group as a whole has strong – and often overlooked – potential for advisors looking to invest in their own futures.

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March 2003

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.