Younger clients offer advisors more long-term value and with almost half a million high-net-worth investors under the age of 40 in the U.S. — is it time more advisors take notice?

“It’s a sizable, addressable market,” said Sebastian Dovey, a managing partner with the consulting firm Scorpio Partnership. “We’re talking numbers.”

The wealthiest U.S. households represent $2 trillion in total investable assets, Dovey said at SourceMedia’s Disrupt | Advice conference in New York City. HNW investable assets climb to $6 trillion globally.

And the notion that younger clients are generally more self-advised is simply obsolete, Dovey said. Up-and-coming investors in their 30s are on the “fast track” for wealth creation and are “open for business,” he said.

THE YOUNGER THEY ARE
Not only do young investors make up a sizable portion of HNW assets, but they’re turning to financial advising earlier in their professional lives than past generations, Dovey said.

The average private client in the U.S. is about 56, but significant life events like divorces and marriages are forging new client relationships much sooner, according to research from his firm.

The research suggests that life changes, specifically the sale of a business or a pay raise, can prompt new relationships with advisors as early as age 38.

“It’s a sizable, addressable market,” said Sebastian Dovey, a managing partner with the consulting firm Scorpio Partnership.
“It’s a sizable, addressable market,” said Sebastian Dovey, a managing partner with the consulting firm Scorpio Partnership.

“Are we realizing we can get to clients earlier?” Dovey said. “What do we have to do?”

MORE VALUE, LESS COST
Younger clients offer more long-term value, he says, and are cheaper to acquire and retain as well. However, they’re not shy about picking up the phone or scheduling an appointment. Clients in their 30s interact almost 15 times a year on average with their advisors, and almost 11 times with other specialists, according to the research, more than any other age group.

That number climbs to 18 contact points a year for complex clients holding more than $4 million in investable assets.

“It’s expensive,” Dovey said. “How do you manage that into your business model?”

Digital tools may help advisors automate some of the client costs away, and might even become necessary in the next five years, according to the research. Seventy-five percent of the respondents in a Scorpio survey say online reporting and dashboards are their most important investment need over the next five years. Being able to easily transfer money and accessing interactive, online planning were also top concerns.

Dovey said wealthy clients can be profitable, but will expect a lot from their advisors.

“The modern client isn’t an expert investor yet,” he said, “but they are quick learners.”

The Scorpio survey polled more than 10,300 HNW investors worldwide with investable assets of $1 million to more than $10 million.

Sean Allocca

Sean Allocca is the associate editor of Financial Planning, On Wall Street and Bank Investment Consultant.