What aging HNW clients mean for wealth management

Canada’s population of high-net-worth investors is growing and aging, changing what’s required of the financial advisors who serve them, says Strategic Insight’s Keith Sjögren.

Between 2016 and 2026, the number of clients with more than $1 million in investable assets is set to expand by 6.4%, making it the highest growing retail segment in Canada, Sjögren told the CFA Society Toronto’s 2018 Annual Wealth Management Conference on Wednesday.

Wealth is becoming more concentrated in Canada, he said, with 85% of investable assets held by 1.5 million households with more than $500,000 in investable assets.

By 2026 more than half of the country’s millionaires will be over 65, creating what Sjögren calls two major liquidity events: selling houses to downsize, and selling private businesses. Nearly half of all family businesses in Canada will be sold in the next decade, he says, contributing to a $900-billion intergenerational wealth transfer.

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The 748,000 households of millionaires over 65 will control $2.4 trillion, or 43% of total wealth, he says.

“The outcome of that is a change of attitudes of these investors from accumulators to preservers—a focus on income generation and a much greater focus on estate planning, the building of a legacy and the opportunity to make philanthropic bequests.”

As financial priorities shift and more high-net-worth clients enter “the administrative phase of life,” more investment counselling firms and brokerages are positioning themselves to give advice around philanthropy, he says.

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Risk of losing clients

This massive wealth transfer also raises advisors’ risk of losing clients. Sjögren says half of widows select a new advisor when their spouses pass, and 98% of children inheriting wealth from parents change advisors.

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“What this is suggesting is that wealth managers no longer view their client as an individual. They view their client as a family. Wealth is a family business, and those advisors that are focused on dealing with Keith instead of Keith’s family are going to find themselves very disappointed,” he says.

Another area for advisors to watch is women’s growing wealth. Women currently control about one-third of investable assets in Canada, but that will be closer to half by 2026, he says. The rate of growth of affluent women is also far greater than that of affluent men.

“If the needs of affluent women are ignored, you place your firm’s growth in peril,” he says.

Those needs include a higher priority on environmental, social and corporate governance (ESG) investing, wealth planning and philanthropy, he says.

“Men easily write a cheque to their alma mater. Women actually think about the cause they’re going to support, and support it in a far more active way,” he says.

Correction: A previous version of this article had the incorrect date for when more than half of the country’s millionaires would be over 65. The correct date is 2026.

Also read:

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Your role in intergenerational wealth transfer