A pair of Schwab Advisor Services studies released June 19 focus on the opportunities for RIAs among the members of “Generation Now,” affluent people ages 30 to 45 who already control $3.5 trillion in investable assets.
While Bernie Clark, executive vice president and head of SAS at Charles Schwab Corp. (SCHW), says “the research clearly shows that the RIA model is right for these individuals,” advisors who assume they can attract and service these younger prospective clients with the same tactics employed for baby boomer clients will be disappointed.
In an interview at ThinkAdvisor’s offices on June 17, Clark pointed out that those RIA firms who already are having success with ‘Gen Now’ “tend to have a next-gen advisor” on their staff. Gen Now wants “more connectivity” with their advisors, he said, and “on their terms.”
Clark said that “to appeal to Gen Now, you have to look like them,” and since they have “new centers of influence,” often tied to their social media networks, advisors must figure out “how do you get into those places?”
In addition, RIA firms that “embrace technology” see it not as “a distraction,” but rather a business model that improves their firms’ efficiency while also serving as an entrée into Gen Now’s networks. That’s yet another reason for advisors to “hire more younger people with social media” expertise, Clark argued.
The “Generation Now” study was conducted in March and April of this year with 40 participants ages 30 to 45 with investable assets of at least $500,000 or a household income of at least $150,000. Schwab Advisor Services also released the findings of its 15th semiannual Independent Advisor Outlook Study (IAOS), which surveyed 720 independent advisors (not all of whom custody with Schwab) from mid-April to early May. The findings of that study dovetailed with the opportunities presented by Gen Now, a term Schwab coined to reflect its belief that younger investors are a significant opportunity now, not in some ill-defined future, for advisors.
Generation Now Findings
The Gen Now study found that these younger affluent individuals share many of the same goals-based planning needs as boomers, which is valuable because “fractional points of return haven’t been driving the relationship” between RIAs and their clients, Clark said. However, they also have different characteristics.
For one, they’re more anxious, based on the experiences they’ve had with terrorism, the Great Recession, the dot-com and housing bubbles and pervasive unemployment, especially among younger people. They also tend to distrust financial institutions, reflected in the high levels of cash they hold in their portfolios. They can’t differentiate between different types of advisors, distrust the profession in general and feel that advisors don’t understand them. However, they hope for financial freedom, which they define as not having to worry about the unexpected, and they mostly want to feel sure that their income and investments will cover the costs of health care, education, housing and elder care expenses.
Finally, Clark pointed out that their money goals do not revolve around acquiring ‘things’ and instead “they want experiences and travel.” In the investing realm, Clark suggested that socially responsible investing strategies will be important to the members of this generation.
The IAOS study, the findings of which were also presented at SAS’ Explore conference for advisors in Naples, Fla., on June 19, was tailored specifically to explore advisors’ attitudes about Gen Now. It turns out their attitudes are decidedly mixed over whether that generation represents a business threat or an opportunity.
Of the 720 advisors surveyed — who self-reported that they had $180 billion in aggregate AUM — 37% said they saw risk in the impending wealth transfers from older generations to younger, and said they needed to “develop new client relationships” that will allow them to maintain their current AUM and grow their businesses.
Another 40%, however, saw this big wealth transfer as “an opportunity to develop a model to meet the needs of emerging clients and smaller accounts.” Those findings are particularly telling, Clark said in the interview, since 40% of RIAs’ clients are now retired, with another 30% to retire in the next 10 years, with serious repercussions for the standard RIA business model of charging fees for managing assets, which will decline with so many clients drawing down their portfolios for income in retirement.
So how can RIAs attract that next generation of clients and their assets? Ninety-one percent of respondents said that demonstrating firm expertise and services will be the most important step they can take, followed at 83% by three different, but related, steps. The three are having a strong reputation “based on firm reviews and centers of influence relationships; offering a unique service or value proposition; and clearly communicating the benefits/differences of the RIA model.”
What about referrals, the lifeblood of new business for most advisors? While 32% of respondents said referrals were a formal and routine part of their firm’s culture, 55% said their referral process was informal. In two other findings, 53% said they believe reaching the next generation will require “engagement with entirely new” centers of influence, but only 32% said that social media were “vital to communicating with the next generation of clients.”
Responding to those findings, Clark said in the interview that as part of Schwab’s ongoing Insights to Action Program, it will launch a new program for advisors to help them “create the discipline” needed around referrals. That program, he said, will stress that in every firm “everybody is responsible for referrals, not just the rainmakers,” and that firms should institute “reward systems” that provide incentives for everyone in the firm — “advisors and support staff” — to get referrals.
The study found that such a system is already partly in place at 55% of respondents’ firms who said they “measure staff performance based on the amount of new assets they bring to the firm.”
Cultura RF/Getty Images Whether it's getting fit, eating better, traveling to new places, experiencing different things, making progress in a career or relationship -- we all have a few ways we'd like to take action to make the next year even better than the last. When you're thinking about the goals you'd like to set and reach in 2015, don't forget to consider how you'd like to improve your personal finances and create a better situation for yourself. Not sure where to start? Try incorporating one of these five financial milestones to reach in 2015 into your new year's resolutions. 1. Learn More About Personal Finance Did you find yourself wanting to learn more about your retirement accounts but didn't know who to ask? Have you been curious about HSAs or not sure what a certain investing term means? Did you want to learn more about money, but didn't know what questions to start asking? Make 2015 the year to increase your financial knowledge and get the answers to the questions you've been asking (or figure out the right questions to asking!). Read some general personal finance blogs like MoneyUnder30 -- and then look for other sites that talk about specific topics or issues you relate to (DailyFinance, of course, is a great start). Check out books at the library on financial planning. Tune in to financial podcasts. Book a call with a financial planner to see how a professional could help develop an action plan for your money goals. And mark your calendar for the fall of 2015. In October, you can attend Financial Planning Days. These events allow you to book a free session with a financial planner to answer questions you have about your personal finances. You can attend classroom-style informational lectures, too. To reach this milestone of continuing your financial education, make a list of three to five of your most pressing financial questions. Make it your mission to find the answers -- and take action on your new knowledge. 2. Boost Your Income If you're happy in your current position and want to continue progressing in your chosen career path, it's time to think about boosting your income. Make it a goal to negotiate a raise in the new year. Your first step: ensuring that you've actually that raise. Consider your strengths and look at the value you've provided to your company over the last six months to a year. When it's time for your performance review, explain to your boss how you go above and beyond and back up your claims. Not quite there yet? Ask for additional responsibilities. Knock your next project out of the park. Look for innovative ways to get work done and provide solutions to common problems in your position. Taking action now can help you earn more from your job before the end of 2015. 3. Track Your Spending and Create a Plan Yes, some people call it a budget, but I like the term "spending plan" because it sounds less restrictive. It's important to know where your money is currently going and then be able to redirect some of it toward your financial goals. In other words, stop keeping every other receipt and calling that good enough, or trying to keep up with your spending and income in your head. Put a system into place and stick with it this new year. Mint.com is a helpful financial tool that syncs up your debit, savings, credit card accounts and even loans you pay. With Mint, you can set a budget, like $200 a month for groceries, and see how much your groceries actually cost you a month. You will know how much you spent without having a running tally in your head. You can also use spreadsheet templates and input information yourself, or use a more complicated software like You Need a Budget. The tool you choose isn't important -- what's important is that you choose something that helps you track your money, spending and goals -- and it's something you'll stick with throughout the year. 4. Increase Your Net Worth You should also be tracking your net worth. Make this a habit in 2015. Your net worth is simply your assets minus your liabilities. Every time you add to your savings, you're building your net worth. That goes for paying down debt, too. The more debt you repay, the higher your net worth rises. Tracking your net worth allows you to see your entire financial picture all on one page. It also enables you to see your progress -- or identify spots where you need to work to make that progress you want to see. Sometimes we make our saving and debt repayment automatic and so it feels like we're not making much progress, but once you check in on your net worth, you'll see how much your plan is paying off! 5. Start a Side Hustle Capitalize on your skills or monetize a hobby to create a side hustle in 2015. Doing so can help you develop extra income -- which you can use to accelerate your progress to other financial goals. This is a financial milestone that everyone should reach, no matter how much you love your current job (or the full-time business you already run). Side hustles allow you to create diverse streams of income and open you up for new opportunities, experiences, and chances to learn new skills and abilities. It's a way of investing in yourself, while making extra money at the same time. Anyone can benefit from side hustling, including people established in their careers. Not sure where to start? Think about what you're good at and what you enjoy doing. Then consider ways you may be able to sell whatever that is to others. If you need some inspiration, be sure to check out Carrie Smith of Careful Cents, who used her side hustle as a freelance writer to pay off $14,000 of debt before turning her side gig into her full time business. Do you maintain the website at your full-time job? Consider taking those skills to a freelance marketplace. Have specialized knowledge? Monetize what you know by offering consulting services. Artistically inclined or talented in a crafty way? Use an online shop platform like Etsy to host and sell what you can make. When you're thinking about resolutions and goals this time of year, don't forget to consider how you can develop a commitment to improving your finances. Reaching some -- or all -- of these financial milestones in 2015 will allow you to feel more empowered and able to manage your money and hit other big goals in the future. More from Sophia Bera
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Charles Krupa/AP DETROIT -- Chrysler and General Motors each posted U.S. sales gains last month, strong signs that Black Friday promotions and falling gas prices drove U.S. auto sales higher in November. Chrysler (FCAU) sales were up 20 percent to nearly 171,000 vehicles, helping the company to its best November in 13 years, while GM sales rose 6 percent to nearly 226,000. Chrysler was led by the 200 midsize sedan with sales that more than doubled to over 14,000. It sold nearly 36,000 Ram pickups, an increase of 21 percent for its top-selling vehicle. Jeep Cherokee small SUV sales rose 67 percent to nearly 17,000. At GM (GM), the Chevrolet Silverado pickup was the top seller with sales up nearly 25 percent to almost 43,000. GMC Sierra pickup sales rose 57 percent to nearly 23,000, and Chevy Cruze compact car sales were up 26 percent to nearly 23,000. The TrueCar.com auto pricing site predicts that total U.S. sales last month will reach 1.3 million, up around 4 percent from a year ago and the fastest pace since August. The hot sales are being fueled by zero-percent financing and rebates. But the sales are still profitable for automakers due to high transaction prices. Analysts predict that Black Friday promotions started early and helped the month close strong, and falling gas prices boosted sales of SUVs. TrueCar President John Krafcik said deals -- such as zero-percent financing on new Chevrolets or a $3,500 credit on a new BMW -- drew buyers, along with hot-selling new vehicles like the Cherokee and Toyota Camry. Despite the deals, it was a profitable month for the industry, with consumers poised to set new spending records. As of mid-November, buyers were spending an average of $30,874 per vehicle, or $165 more than the previous record of $30,709 in October, according to consulting firms J.D. Power and LMC Automotive. That was partly because buyers were loading up their vehicles with extras like adaptive cruise control and navigation, and also because low gas prices convinced many buyers to pick pricier SUVs. Gas prices fell 23 cents in November to a four-year low of $2.76 per gallon, according to AAA. Combined record transaction prices with strong new-vehicle retail sales has November on pace for a record month for consumer spending on new vehicles at $33.3 billion. That's $1.1 billion more than the previous record for the month of November set in 2013. 
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