Four faces

Amidst market uncertainty, the largest generation of Canadians, the boomers, careens toward retirement.

As such, the generational divide is widening and advisors face increased challenges. They’re often required to cater to clients in two, three, and even four separate cohorts (pre-boomer, 62 or older; boomers, 46 to 61 years old; Gen X, aged 30 to 45; and Gen Y, born after 1978), each with unique financial and tax-planning needs.

The advisor portion of this year’s survey draws out details about how your colleagues are dealing with this issue. The second part of the study explores client attitudes regarding their investments and financial advisors. It provides insights into expectations.

The two surveys were conducted online among 1,002 Canadian financial advisors and 1,527 adult Canadians who work with a financial advisor. Both surveys were fielded between September and October 2008 and represent a margin of error of +/-3.1 and +/- 2.5 respectively, nineteen times out of twenty. The financial advisor survey is weighted by region to ensure proper representation in the advisor population, while the investor sample is weighted by region, age and gender.

So, based on data from the studies and the insights of our roundtable participants (see page 17), ask yourself the following questions:

• How realistic are your clients about their financial situations and how do they compare with the average investor? While advisors generally (86%, with 27% strongly agreeing) believe their clients, 62 and older, are realistic about current and future financial positions, far fewer believe boomers (70%, with only 13% strongly agreeing), Gen X (51%) and Gen Y (44%) are realistic. Overall, advisors say 59% of their clients, 62 and older, are on track to save sufficiently compared to 52% of boomers, 37% of Gen X and 30% of Gen Y. The data indicate 61% of your clients believe they are knowledgeable investors.

• Have you divided your client base to provide different levels or types of service or fee structures? A slim majority (52%) of advisors segment client base by assets, far fewer by life stage (38%), age (25%) or gender (5%).

• Have you considered letting some clients have a set amount of play money to help demonstrate the value of a properly balanced portfolio? Advisors report that on average, between 11% and 22% of their client base are using discount brokerages.

• Have you considered your clients’ comfort in working with you based on who you are? Only 25% of investors say they feel more comfortable working with an advisor of the same gender; however, four in 10 investors prefer to work with an advisor who is around the same age.

• Are you prepared for the changing needs of aging clients? Only 15% of advisors strongly agree they “anticipate changing their business model as their current clients retire.” These advisors point to increased estate planning, changing compensation models, meeting the needs of older clients and retirees, more conservative approaches, and using guaranteed products as possible responses to the greying of their books.

• Are you building your client base for the future? The majority (61%) of advisors say they spend less than average amounts of time with Gen Y clients.

• What are you doing to ensure financial stability for near-retirees and retirees? When asked how they are addressing longevity risk, the top advisor responses are increasing life expectancy in the plan (17%), and using guaranteed products (16%).

• Are you educating older clients on the legacy and financial benefits of investing in RESPs for their grandchildren? Only 8% of those 62 and older and 7% of boomers are interested in purchasing RESPs for heirs. This may reflect a lack of knowledge of the benefits of this type of investment, both as a tax benefit and as part of their legacy.

It’s a lot to think about. And I’d like to extend an enormous thank-you to Justin Graham, Senior Research Manager and Vinod Ramlakhan, Research Analyst from the Rogers Business and Professional Publishing Group for their meticulous and tireless work on this extensive study.