New approach needed for Gen X and Y clients
Generation X and Y high net worth clients require a different value proposition approach from financial advisers, according to Experience Wealth Advice managing director Steve Crawford.
With regulatory change pushing for advisers to demonstrate the value they can bring to the planning process, Crawford said the clients he deals with are usually income rich and asset poor.
"The traditional view has been that you get paid financial advice fees as a proportion of the assets that you're managing; therefore if a client comes in with very little assets the perception has always been that it's difficult to make a profit out of that client," he said.
"If you shift your value proposition and your fee model away from a percentage of assets and link it more towards the income, your fee is then a by-product of that type of conversation."
According to Crawford, it's important for these types of clients to find their own reason to save and budget. Once they've gotten to that point, it's a matter of visibility, ease-of-use (in terms of reporting software) and accountability.
"The accountability is not necessarily a ‘whip-cracking' exercise — it's a mirror that you're holding up to them on a regular basis," he said.
This includes how they're progressing towards not only their savings targets but their spending targets as well, he said.
"Doing that once a year, giving them an aspirational budget, patting them on the back and seeing them in 12 months time just won't work," he said.
By building the advice relationship on the back of a model like this, Crawford said the opportunities are larger than many planners currently perceive.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
