As Baby Boomers begin to draw down their retirement savings, planners have little choice but to find new clients to fill the gap, writes Kristen Paech.

By 2010, financial planners will be competing for less than half the number of potential new “wealth accumulator” clients than they were a decade ago.

This is the seismic shift that lies ahead for the financial planning industry, according to demographer Bernard Salt.

The changing landscape calls for a dramatic change in the way that financial planning businesses develop and grow their client base; however, with many advisers now in their 50s, the challenge is finding a way to engage with the younger generations.

A new series of educational toolkits launched by BT Financial Group hopes to help advisers “future-proof ” their business against an ageing client base by tapping into the next generation of wealth clients – Generations X and Y – as well as to better service the changing needs of Baby Boomers.

The BT Generation Series contains practical tools including educational information; tailored seminar presentations; letters; media releases and template advertisements that can be used to develop a marketing plan, build the business and diversify the client base into these new client segments.

The three toolkits are available exclusively to wrap advisers in online modules via the BT Wrap DeskTop.

Chris Freeman, head of BT Wrap Solutions, says as Baby Boomers draw down on their savings, the need to target Baby Boomers’ children and other generations is imperative to ensure advisers’ businesses continue to grow, both in terms of funds under advice and client numbers.

“According to Bernard Salt, in the late 1990s and early 2000s financial planners could bank on around 130,000 potential new wealth accumulator clients every year,” Freeman says.

“By 2010 they’ll be competing for less than half that number and by 2020 every financial planner and fund manager in Australia will be battling for a share of just 20,000 new clients entering the wealth marketplace who have the means and motivation to accumulate capital.

“These dramatic demographic challenges are one of the most important longer-term issues facing the wealth industry and for financial advisers the challenge is to fill that vacuum by finding new ways to deliver value to a generation of investors so their business can continue to grow.”

BT is working with dealer groups such as Count Financial to help them engage the new generations and build sustainable businesses for the future.

Dealer groups such as DKN, Genesys and Lonsdale have also expressed an interest in tapping into these markets, according to BT.

Freeman admits not all dealer groups are prepared to go down this route, with some opting to focus solely on the lucrative pre-retiree and retiree markets over today’s youth, who are often assetpoor and debt-rich.

Indeed, one of BT’s clients, Westpac Financial Planning, announced in August plans to cull half of its ‘entry level’ or ‘foundation’ planners – its most junior financial planners – and increase its experienced, senior planners by more than 200 over the next three years.

Mark Spiers, Westpac’s general manager of advice, says that by 2015, there will be a fundamental change in the advice needs of Australians, as the pre-retirement market (age 55-64) grows by around 30 per cent and the retirement generation swells by 65 per cent.

The move, he says, is intended to align Westpac’s advice footprint, to ensure the right mix of planners to meet the needs of its client base – particularly those seeking more complex advice solutions.

Recognising that the pre- and post-retirement markets are also growth areas, BT’s training toolkits include a module on servicing the Baby Boomers.

But Freeman says the focus has to shift further down the curve, to the children of Baby Boomers, if planners are to diversify their client bases ahead of dramatic demographic change.

“We’re not saying it’s the death knell for financial planners – far from it – but it’s a real wake-up call,” he says.

“Now, the rubber hits the road; people are moving from the accumulation into the retirement phase at a rapid rate.”

The Financial Planning Association of Australia (FPA) has backed the initiative, with advisers able to earn up to five continuing professional development (CPD) points for using the training modules.

Todd Walters, CPD accreditation, professional services at the FPA, says the educational presentations, practical business tools and marketing collateral “all serve as valuable resources that will raise awareness of the impending challenge and equip advisers to manage and grow their businesses for the future”.

According to BT, to future proof their business, advisers will have to:

• Establish meaningful dialogue with Generation X and Y to secure future income streams

• Redefine how they look at clients entering retirement to maximise their value-add to this changing group

• Address the issue of succession planning

One in two advisers will retire in the next five years, according to Business Health, making succession planning one of the most critical issues facing practice principals in the near-term.

Freeman says planners can increase the value of their business by having a diversified client base and should start recruiting younger planners to assist with the process.

Pauline McFarlane, senior executive, business development and marketing at Count Financial, says this is already starting to happen.

The FPA has set up the Future Financial Planners Council to encourage university, vocational and other students and graduates to join the industry, while some planning firms have developed formal tie-ups with universities.

“In addition, generations X and Y are typically spenders, so our advisers can deliver value to this segment by educating them on the importance of saving so they can achieve their financial goals in the future,” McFarlane says.

Natalie Sillar, head of wrap marketing, says BT recognises that not all planning firms are large enough to have big marketing teams, so the group has developed a marketing strategy template based on real targets, such as increasing the client book by 10 Generation Y clients per year, for example.

The firm is also encouraging firms to give university seminars, and set up FaceBook pages, as a way of engaging the younger generations.

It is important to recognise that Generation X and Y have different needs and goals to those of the Baby Boomers, Freeman adds.

While Baby Boomers are typically looking to maximise their superannuation, minimise tax and ensure their finances are in order as they approach retirement, Generation X and Y’s priorities might be paying off debts, developing a family budget, getting on the property ladder and so on.

Freeman says the changing demographics and needs of adviser client bases have implications for wraps and platforms.

“We want to help advisers be an ‘adviser for life’… just like cradle to grave models, they don’t have to change platforms,” he explains.

BT is also looking to add mortgages and credit cards to its wrap next year, which would make it the first institution to offer such a feature.

Sillar says engaging Generation X and Y clients is not an easy task, but is a necessary step in building a diversified business.

“They need to be able to deliver scalable advice; the platform offering provides the product solution as well,” she says.

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