Advisers are seeing — and will continue to see — total assets under management slide over the foreseeable future, says Valerie Brown, chairwoman of Advisor Group. The solution? Millennials, she says, meaning both clients and new, younger advisers.
Decumulation is here and will remain as long as baby boomer clients leave work in greater numbers, and there is a “required move out of qualified assets,” Brown says. “RMDs are, well, required.” Not only are boomers drawing down on their assets, but they are beginning to pass away.
When this happens, assets generally are disbursed to their family members who often don’t keep the same adviser. The Social Security Administration estimates that, on average, 10,000 boomers die each day, or about 4 million each year.
More than a third of the nation’s largest RIAs lost AUM in the past year, including many of the largest firms, according to Financial Planning’s 6th annual RIA Leaders ranking.
For advisory firms, Brown offers this fix: “Make sure you’re bringing in the next crowd [of younger advisers]. They don’t operate the same way.”
Brown also suggests that planners work to attract and keep “older millennial” clients, who are “growing their wealth.” Millennials, also known as Gen Y, were born between the early 1980s and the early 2000s. This group has overtaken baby boomers as the largest living generation, according to U.S. Census Bureau statistics. And the older cohort has a good head start on building their career and their wealth.
Firms should be thinking about “getting millennials into this business,” Brown says. “They should be thinking ,’what do I have to do to start embracing them?’”
One way is to show younger, talented people “that this career model has a real advantage,” she says. “We have to be succession planning.” Advisor Group has worked to connect younger advisers with older ones over the past year, she says. “We’ve helped move $2 billion in assets from younger to older advisers. Helped connect them. And this is just the tip of the iceberg.”
Overall, the problems of aging advisers and decumulation “are very real,” she says. “Focus on older millennials.”
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