Intelligent Advisor

Don't Bet the Farm on NexGen Clients

Lately the industry’s been a bit obsessive over “the great wealth transfer” and how advisors can appeal to Next Gen investors. But a new PriceMetrix study shows these clients are not as coveted as previously thought.

PriceMetrix found that while client retention has been high in recent years—advisors retained 90 percent of clients in 2013— there are several factors that cause retention rates to vary significantly, including age and income. Younger clients, as well as those with fewer assets, are less likely to stay with their advisor over the long haul, according to the study. A 50-year old client retains their advisor about 90 percent of the time, while a 30-year-old client retains their advisor only 82 percent of the time, PriceMetrix reported.

Smaller households—which many average NexGen clients fall into at the beginning of their investing lifetime—also pose a problem to long-term retention. The study shows that as household assets increase, so does the probability of retaining the client. Households with $100,000 in investable assets retain their advisor 87 percent of the time, compared to the 94 percent of the time that households with $500,000 in assets retain their advisors.

“These data points should give pause to those advisors who might expect or hope that pursuing younger clients will produce long term client relationships,” says Doug Trott, president and CEO of PriceMetrix. “While younger clients may have longer time horizons with respect to their financial plans, the data do not support the claim that they intend to spend many years with one advisor.”

While not all NexGen clients are a bad bet (young, small clients still retain their advisor more than 80 percent of the time on average), the study shows it’s important for advisors to critically evaluate the resources devoted to these clients. 

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Diana Britton

Diana Britton is the Managing Editor of and REP. Magazine, covering asset management and independent broker/dealers from all angles. A native of Los Angeles, she now lives in...

Ryan W. Neal

Ryan W. Neal is an associate editor for Originally from Sacramento, Calif., Ryan studied English and philosophy at UC Santa Barbara and found his way into journalism. After...
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