The Tipping Point: Will the Coming Wave of Wealth Value Advice? - Fidelity Clearing & Custody Solutions
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The Tipping Point:
Will the Coming Wave
of Wealth Value Advice?
1
The Tipping Point:
Will the coming wave of wealth value advice?
Many investors today are seeking different types of relationships with their financial
advisors. No group epitomizes this more than Generations X and Y, the “coming wave of
wealth,” who generally seek advice relationships that go beyond investment management.
They seek relationships that help them achieve peace of mind and even their life’s purpose,
as well as realize financial and investment-related objectives. This report provides insights on Gen X/Y
millionaires:
Gen X/Y millionaires are one important cohort in this coming wave of wealth.
They are highly attractive to most financial advisors due to the assets they’ve already • Why they are at a tipping point for advice
accumulated and are at a critical moment in their lives to engage with financial advisors – • What the future of wealth looks like
due to their age and the complexity of their financial situations. • What they value in an advisor
to help firms position themselves for
But, they are also at a tipping point.
growth with this important client segment.
Will the wealth holders of the future value advice? Will they choose to work with your firm
instead of another? The 2017 Fidelity® Millionaire Outlook Study, now in its 9th year, finds
that they may not work with advisors – unless advisors deliver the value and experience that
Gen X/Y millionaires seek. Now is the time for the advice industry to “tip” Gen X/Y
millionaires toward advice before it’s too late.
1. The terms "study" or "survey" used throughout this report refer to The 2017 Fidelity Investor Insights Study (a.k.a. The 2017 Fidelity® Millionaire Outlook Study) , which was conducted in two phases. The first was an online, blind study conducted during
the period January 18th through February 13th, 2017. It involved a total of 1,367 20-minute (on average) online interviews, with the sample provided by TNS, a third-party research firm not affiliated with Fidelity. Of the 1,367 respondents, there were 601
“millionaire” participants, who are defined as those with $1 million or more in total investable assets. The data in this report reflects the sentiments of only the millionaires in the study. The second phase involved a series of qualitative focus groups
conducted with 51 affluent investors in 3 geographically diverse locations (San Francisco, Chicago, and Boston). Quotes from these focus groups are reflected throughout the report. For more detail on the study, please refer to the last page in this report.
2. Generational definitions used in this report: Gen Y is defined as those ages 21-35. Gen X: ages 36-51. Baby Boomers: 52-70. Silvers: 71 or older. References to "Gen X/Y millionaires" include surveyed millionaires in both Gen X and Gen Y. References to
"Baby Boomer+ millionaires" include millionaires surveyed in both the Baby Boomer and Silver generations.
2
3. All data cited in this report is from the 2017 Fidelity® Investor Insights Study unless otherwise noted.
The Tipping Point:
Key Findings
• Today’s Gen X/Y millionaires may become • Across the board, Gen X/Y millionaires are • Consistently delivering and communicating
tomorrow’s deca-millionaires. They earn more willing to pay for advice than Baby value will be even more important going
more ($200k vs. $125k income), and have Boomers+, especially for services higher in forward, since Gen X/Y millionaires are
already accumulated more assets ($3.4M Fidelity’s Advice Value Stack1 that support more willing to switch advisors for lower
total assets vs. $2.5M) than their Baby achieving peace of mind or fulfillment. fees.
Boomer+ counterparts.
• Among millionaires of all generations, • Gen X/Y millionaires generally seek more
• 42% of Gen X/Y millionaires are currently helping clients build “peace of mind” comprehensive services from advisors (62%
unadvised, presenting a significant drives greater loyalty (e.g., higher Net of Gen X/Y vs. 25% of Baby Boomer+
opportunity for advisors who want to win Promoter Scores or NPS) than helping with millionaires).
their business. In fact, fewer Gen X/Y money management.
millionaires have an advisor today vs. five • Technology is paramount. 53% of Gen X/Y
years ago. • Gen X/Y millionaires have much higher millionaires would change advisors if theirs
expectations for investment returns from weren’t using technology effectively (vs. 29%
• 1 in 2 Gen X/Y millionaires are open to an advisor: 16%. Their Baby Boomer+ of Baby Boomers+).
meeting their parents’ advisor, opening the peers expect a more realistic 7%.
door for retaining assets as wealth transfers
across generations in families. • Many millionaires do not know what they
paid their advisor last year (65% of Gen
X/Y vs. 56% of Baby Boomer+ millionaires).
1. A description can be found on Slide 34.
3
What’s Inside?
1 The Tipping Point
2 The Wealth Holders of 2030
3 The Value of Advice
4 Actions to Consider
4
1 2 3 4
1 The Tipping Point
5
1 2 3 4
The future of wealth is at
a tipping point for
engaging with advisors
Now is the time to engage the
wealth holders of the future in order
to ensure that they choose the path
to financial advice – and to your firm.
Do-it-yourself or Comprehensive and
minimal advice usage collaborative advice
6
1 2 3 4
Generational share of net household wealth1
100% 4%
16% Gen Y
14%
31% Gen X
By 2030, Gen X/Y will surpass
Baby Boomers in terms of 50%
holding the most wealth in
the country. Baby
45%
Boomers
33%
9% Greatest
0% Generation
2015 2020 2025 2030
1. “The Future of Wealth in the United States.” Deloitte
Center for Financial Services. 2015
7
1 2 3 4
Bequests forecast to be received ($ billion)
800
600
Their inheritances will surpass
those of Baby Boomers as 400
early as 2023, enabling them
to capture a significant share
200
of an estimated $24 trillion1 in
wealth transfer.
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Greatest Generation Baby Boomers Gen X Gen Y
1. “The Future of Wealth in the United States.” Deloitte Center for Financial
Services. 2015. The estimated $24 trillion in wealth transfer is projected for the
period 2015 - 2030, is after taxes and charitable giving, and reflects spousal,
8inter- and intra-generational transfers.
1 2 3 4
Gen X/Y Millionaires are leading % of Gen X/Y millionaires in
U.S. millionaire population
this wealth shift – and their ranks
are growing:
2017 18%
Given their current asset and
2012 8% income levels and the years they
“I'm 27. I spent my 20s so far: saving after college,
paying very cheap rent, with a good job, and not in have left in the job market,
The cohort
Boston but in Atlanta, where I could save a lot more.
I have these goals, and I might be naïve about them, has increased today’s Gen X/Y millionaires
may become tomorrow’s
2.3x
but I'm going to work really hard to get there.”
Daniel, 27, Healthcare
deca-millionaires, representing
since 2012
an even greater opportunity
for advisors.
Based on the Survey of Consumer
Finances, there are approximately
869,000 Gen X/Y millionaire
households in the U.S. today.1
1. 2016 Federal Reserve Survey of Consumer Finances
9
1 2 3 4
Gen X/Y millionaires offer opportunity
44
Retirement
With an average age of 44, Gen X/Y millionaires are at
the perfect age to create relationships with advisors.
Fidelity research shows that 43 is the age that most
millionaires start working with an advisor.
Establishing relationships with these clients early sets
“Once we got married, got a house, and had our first child, [finding an up relationships with high customer lifetime value.
advisor] just seemed like the right thing to do. We just wanted to make
sure that we were getting solid advice and proper direction, and to make
sure that all of our efforts were not going to be jeopardized. The first
advisor I talked to was a friend of my parents.”
Brian, 44, Information Technology
101 2 3 4
Many are unadvised, and even more are open to meeting their parents’ advisor
Why are 42% of Gen X/Y millionaires unadvised?
42% of Gen X/Y millionaires
1. Enjoy investing on my own
are not using an advisor today
2. Want to retain control of investment decisions
3. Don’t want to pay an advisor’s fees
However, 49% of Gen X/Y 4. Don’t trust advisors to have my best interests as their priority
millionaires are likely or very likely to 5. Know enough to make investment decisions on my own
meet their parents' advisor if asked
“Conflict of interest is one issue I have with advisors. I don't want someone
pitching me to buy a high-fee product. I just want to make sure the interests are
The opportunity exists to educate and "tip" aligned…almost like a doctor relationship. If I were to have an advisor, they'd be
these investors toward valuing advice by like a doctor. They'd have the Hippocratic Oath: ‘first, do no harm’ and always
have their patient's interests in mind.”
addressing their concerns and seeking
introductions through their parents. Allen, 41, Web Development
111 2 3 4
They have a propensity to refer They want to consolidate assets
Of those Gen X/Y millionaires with an advisor, Many Gen X/Y millionaires are seeking to
69% have referred at least one person to their simplify their financial lives by consolidating
advisor in the past year (vs. 48% of Baby Boomers+). assets with one advisor.
Gen X/Y 48%
Baby Boomers+ 18%
121 2 3 4
“I don't mind paying for something if I feel the value creation is higher. If it's a
They see value in what advisors do basic service like asset allocation that can be done by an algorithm, it’s pretty low
value in this day and age. But, if we're getting someone that's going to beat the
market, that has a much higher value prop and I'm willing to pay for that.”
Contrary to conventional wisdom, Gen X/Y Marco, 47, Consultant
millionaires are generally willing to pay more for
the services of an advisor than their Baby
“I definitely think [robos are] integrating some of the benefits of models,
Boomer+ counterparts. Find out more in section 3. technology and analysis, but I still put a value on the human part a little bit more.”
Thomas, 44, Real Estate Law
131 2 3 4
However, some Gen X/Y millionaires
may be seeking advisor alternatives
2012 2017
Fewer Gen X/Y millionaires have
72% 58%
an advisor now vs. 5 years ago
9% are currently using a digital advisor 9%
58% say that, because of access to
online financial tools and resources,
58%
they are more comfortable making
their own investment decisions
141 2 3 4
Still, other Gen X/Y millionaires who work with an advisor
today may be tempted to switch firms for lower fees
Even though 65% of Gen X/Y millionaires (vs. 56% of Baby Boomers+) don’t know
how much they paid their advisor in fees last year, a significant portion would
consider moving to an advisor with lower fees.
This underscores the importance
of consistently demonstrating
and communicating the value
that your firm provides to these
younger clients – to “tip” them to
your firm as opposed to another.
52% 27% 42% 8%
Gen X/Y Baby Boomers Gen X/Y Baby Boomers
“If my advisor increased their fees, “I could be easily swayed to switch
I would consider switching to my primary financial advisor if
another advisor” another advisor had lower fees”
151 2 3 4
Gen X/Y millionaires also are more Preferred Fee Structure for Millionaires
Gen X/Y Boomers+
likely to express interest in Using a Financial Advisor
alternative fee structures. Charges an overall fee that is a percentage of your total
38% 38%
account value
Charges a one-time flat fee (specific to individual services) 21% 8%
Although most millionaires pay asset
based fees today, Gen X/Y millionaires Charges a commission per trade 21% 17%
are more likely to prefer other fee Charges an annual retainer (specific to individual services) 16% 5%
structures (e.g., annual retainer, one-
time flat fee, hourly fee) than older Charges an incremental fee specific to an individual
12% 8%
millionaires. service that is a percentage of your total account value
Charges an overall annual retainer (for multiple services) 10% 7%
Charges an hourly rate or fee 9% 2%
Don’t know 8% 18%
“I would ideally want to pay by fee for service - a fee
schedule based on work performed and defined Percentages may sum to more than 100%, because respondents could choose multiple fee structures
based on services their advisor performs, or which they would prefer their advisor performs.
upfront - definitely not percentage of assets under
management, because that's just a tax.”
Matt, 51, Finance
161 2 3 4
A Trend to Watch Across Gen X/Y:
FIRE (Financially Independent / Retiring Early) “Financial independence. Since a very early age, I
would say more than my peers, I've been focusing
on saving as much of my salary as possible for early
• Some Gen X/Y investors have their sights set on achieving financial retirement. I don't want to be dependent on a job. I
freedom at an early age, as opposed to waiting until later in life to retire. want to be able to travel, and do other things.”
• Those that adopt this approach are opting out of the traditional workforce Jessica, 32, Real Estate
after only a decade or two of employment, and retiring as early as age 35
or 40 through a focus on spending less and earning more.
“I want financial independence. Not retirement. I
• Most people in the FIRE segment are living well below their means and think that's a dirty word… I’d like to achieve ‘escape
saving anywhere between 50-80% of their income. velocity.’ In other words, to have enough money that
it grows and sustains me.
• Their objectives can vary from having the freedom to pursue activities and
Financial independence means not needing to have
passions outside of work, to not being reliant on a job for financial security, an earned income from a 9 to 5 job, so that I can
to creating sources of passive income. focus on things that I enjoy doing.”
• They tend to favor lower cost investment products, and may be reluctant Matt, 51, Finance
to pay an advisor’s fees.
Sources: Various online resources such as: “The Secret World of the 'FIREd‘,” Forbes, August 1, 2016 and “She retired at
17
28 with $2.25 million,” CNN, August 2, 2017.1 2 3 4
By not adapting their offerings to meet
the needs of Gen X/Y investors or
taking steps to prove the value of
Corporate DC Contributions and Distributions1
professional advice to this group, firms $600
may experience a decrease in assets
and revenues. $500
Evidence of this can already be seen in $400
retirement plan flows, with distributions
outpacing contributions since 2013
$300
when the first wave of Baby Boomers
reached age 70.
$200
It is critical for advisors to engage now,
$100
before the wealth holders of 2030 are
tipped away from advice – or away
from your firm towards another. $0
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
Contributions Distributions
1. The Cerulli Report: U.S. Evolution of the Retirement Investor, 2016
181 2 3 4
2 The Wealth Holders of 2030
191 2 3 4
The demographics, behaviors, and preferences of Gen X/Y
millionaires provide a window into what the majority of wealth
holders could be like in 2030.
Gen X/Y millionaires at a glance:
Are more diverse Expect good
and female technology Let's take a deeper look
at Gen X/Y millionaires...
Look for
Are more hands-on
comprehensive
with investments
advice
Have different expectations
for investment returns, and
their advisor relationship
201 2 3 4
In some ways, Gen X/Y millionaires look similar to their older counterparts.
Their wealth is primarily self-made About 6 in 10 work with an advisor today. The vast majority are college-educated.
rather than inherited.
Gen X/Y Baby Boomers+ Gen X/Y Baby Boomers+ Gen X/Y Baby Boomers+
Self-made 88% 88% Self-made
Bestowed 12% 12% Bestowed 58% 63% 91% 85%
They work in similar professions. Approximately 3/4 are married.
Gen X/Y professions: Baby Boomers+ professions: 74% of Gen X/Y
are married/partnered
Information Technology 15% 9% Finance/ Insurance Of unmarried 18% single, never married
Gen X/Y: 3% divorced, 6% widowed
Medical / Healthcare 10% 9% Information Technology
77% of Baby Boomers+
General Management 9% 9% Medical / Healthcare are married/partnered
Of unmarried 9% single, never married
Baby Boomers+: 6% divorced, 7% widowed
211 2 3 4
However, in other ways, Gen X/Y millionaires look quite different than the investors that precede
them – with higher assets and incomes, more complex families, and greater diversity.
They are more diverse. They have higher household incomes. They are more likely to have debt.
% Female % Non-Caucasian Gen X/Y 68% 41% Baby Boomers+
Gen X/Y Baby Boomers+
44% Gen X/Y 17% Gen X/Y
vs. 32% Baby (mostly Asian/Hispanic) $200K (median) $125K (median)
Particularly 49% Gen X/Y
Boomers+ vs. 5% of Baby Boomers+ mortgage debt: 22% Baby Boomers+
They are more likely to be supporting both children and parents financially. They have more assets.
Gen X/Y Baby
Supporting children / grandchildren Gen X/Y Boomers+
Baby Boomers+ financially or in their day-to-day lifestyles:
61% Gen X/Y Investable
$1.75M $1.75M
20% Baby Boomers+ assets (Median)
Retirement
Similarly supporting $1.65M $0.75M
assets (Median)
Have children: 69% 71% parents or grandparents:
Have children 20% Gen X/Y Total assets $3.40M $2.50M
under 21: 42% 6% 8% Baby Boomers+
221 2 3 4
Gen X/Y millionaires take a more hands-on approach to their
investments than their Baby Boomer+ counterparts.
20% 37% They are more self-directed, or
validators with an advisor, than
43% delegators of investment decisions1.
Gen X/Y Baby Boomer+
They are more comfortable making
58% 44% investment decisions on their own
due to access to online financial
tools and resources.
They like investing some on their
58% 39% own but letting an advisor take
care of the rest.
1. Self-directed: I do my own research and make my own investment decisions without the help of a professional advisor.
Validators: I make my own decisions, but work with one or more professional financial advisors or an online-based computer
23platform for information and a second opinion.
Delegators: I delegate decisions about my investments to one or more professional financial advisors.1 2 3 4
Gen X/Y millionaires consider technology a key factor in advisor
selection, and an integral component of the advisor relationship.
Gen X/Y 53% More Gen X/Y millionaires said they would find
a new advisor if theirs weren’t using technology
Baby Boomers+ 29% to enhance services.
Gen X/Y 23% Some consider the "use of technology for
collaboration" as a top 3 factor in choosing an
Baby Boomers+ 2%
advisor.
Lack of web portal access to their financial documents is a key area of frustration.
“It's not technology for technology's sake. I want technology, so that I can have full visibility and
know what's going on. A lot of these groups just don't have that - even the monthly statements
are just a garbled mess.”
Colt, 32, CEO
241 2 3 4
Gen X/Y millionaires turn to their advisors for a broader set of
services, and a more holistic approach.
62% of Gen X/Y millionaires would like their financial
advisor to provide more comprehensive services
(vs. 25% of Baby Boomers+).
“It would be helpful to just have a very basic plan to help us with a strategy as to how we can
best budget for things, pay down debt, save for college. I feel like we're just kind of flying by
the seat of our pants.”
Kelli, 48, Fitness Professional
251 2 3 4 The goals of Gen X/Y millionaires reflect their focus on accumulating wealth and reaching financial freedom, while their older counterparts are focused on maintaining wealth. Baby Boomer+ Gen X/Y Top 3 Goals: Top 3 Goals: Maintaining wealth Increasing household wealth Supporting current lifestyle Providing for their family’s financial security Supporting lifestyle in retirement Supporting their lifestyle in retirement 26
1 2 3 4 Given their relatively younger age and goal to increase assets, Gen X/Y millionaires have aggressive targets in mind for investment growth. Gen X/Y millionaires expect advisor investment returns to be 16% on average. Compare that to Baby Boomers+, at a more realistic 7%. These expectations may be artificially high due to the bull market of the last 9 years. 27
1 2 3 4
Their current portfolios reflect this more aggressive stance, with more
Gen X/Y millionaires owning riskier products.
Have risk-related products in
their portfolio:
Gen X/Y vs Baby Boomers+
Alternative investments
(e.g., private equity, structured
products, hedge funds)
20% vs 11%
Venture capital investments
19% vs 6%
Foreign currency
16% vs 5%
Derivatives (e.g., futures, options)
14% vs. 6%
281 2 3 4
They also are more likely to use managed accounts and less likely to have
fixed income and individual stocks in their portfolios.
Top 10 Investments Owned:
Gen X/Y Millionaires Baby Boomers+ Millionaires
Individual domestic stocks 58% Individual domestic stocks 67%
Domestic equity mutual funds (including lifecycle funds) 48% Domestic equity mutual funds (including lifecycle funds) 56%
Certificates of Deposit (CDs) / Money market accounts / Certificates of Deposit (CDs) / Money market accounts /
43% 48%
Cash equivalents Cash equivalents
Domestic blended bond and equity mutual funds Domestic bond mutual funds (including lifecycle funds) 42%
40%
(including lifecycle funds)
Domestic blended bond and equity mutual funds
Equity Exchange Traded Funds (ETFs) 34% 38%
(including lifecycle funds)
Domestic bond mutual funds (including lifecycle funds) 33%
International mutual funds 35%
International mutual funds 30%
Equity Exchange Traded Funds (ETFs) 34%
Real estate investments (including real estate investment
30% Annuities 34%
trusts, but not including your primary residence)
Individual domestic bonds 29% Real estate investments (including real estate investment
32%
Managed accounts trusts, but not including your primary residence)
27%
(e.g. separately managed accounts, wrap accounts) Individual domestic bonds 32%
29Source: The numbers reflect the percentage of millionaires in each group that own each investment.1 2 3 4
Gen X/Y millionaires are more likely to increase or add investments in the
coming year than Baby Boomers+.
Top 5 Products they Plan to Add Next Year:
Gen XY Millionaires Baby Boomers+ Millionaires
Individual domestic stocks 36% Individual domestic stocks 22%
Domestic equity mutual funds (including lifecycle funds) 34% Domestic equity mutual funds (including lifecycle funds) 15%
Domestic blended bond and equity mutual funds Certificates of Deposit (CDs) / Money market accounts /
30% 13%
(including lifecycle funds) Cash equivalents
Equity Exchange Traded Funds (ETFs) 28% Equity Exchange Traded Funds (ETFs) 12%
International mutual funds 26% International mutual funds 10%
Do not plan to add/increase in the coming year 41% Do not plan to add/increase in the coming year 55%
Source: The numbers reflect the percentage of millionaires in each group that plan to increase their investments in each asset class next year.
301 2 3 4
3 The Value of Advice
311 2 3 4 Clients' perceptions of value are changing, and Gen X/Y millionaires are a perfect example of the types of clients that are driving this change. They are looking for advisors to provide multiple Fulfillment types of value, and they are more willing to pay for them. Peace of Mind For many young investors, managing the money Achieving Goals is the baseline service they expect, whereas comprehensive planning, education, organization, Managing the Money and help with life goals are examples of additional services they value and seek out in an advisor. 32
1 2 3 4
Fidelity recently created the New Advice Value
Stack to capture the ways in which investor
perceptions of value are changing in the advice
industry. It is based on work by Bain & Fulfillment
Company about how companies create value
with consumers today. Accomplishing life’s
purpose
Leaving a legacy
At the functional level, value is delivered by
managing money. Value rises from there to Peace
helping clients achieve goals, have peace of of Mind
mind, and - ultimately - achieve their life’s Taking care of Organized and More discretionary Freedom from
loved ones in control time worry
purpose.
The advice industry has tremendous potential Achieving
to deliver higher levels of value to clients,
Goals
and is well-positioned to help clients College Healthcare Retirement Estate Charity
achieve fulfillment.
Key to delivering on the New Advice Value Managing
Stack is doing so in a scalable way that results
in reliable outcomes, but still connects with
the Money
Money manager Asset Security Insurance Income Taxes Debt Cash flow
clients emotionally. selection allocation selection generation
331 2 3 4
Across the board, Gen X/Y millionaires place
Fulfillment
greater (or equal) value on advisory services
than their Baby Boomer+ counterparts. Peace of Mind
They are willing to pay more for most services -
especially as you move up the value stack. Achieving Goals
Managing the Money
341 2 3 4
Managing the Money
% of millionaires willing to pay more for an advisor who:
Implements tax strategies to ensure I minimize
the taxes I have to pay
(55% Gen X/Y vs. 52% Baby Boomers+) “[Trust in my advisor] started with performance. That was kind of the foundation -
building that trust in that business relationship. But, he was just someone very
similar to me - similar life philosophy, similar upbringing, and with similar goals. It
Delivers investment returns above benchmark indices was easier to compare life notes.”
(55% Gen X/Y vs. 56% Baby Boomers+)
Brian, 44, Information Technology
Selects portfolio managers that create positive
investment returns for me
(50% Gen X/Y vs. 43% Baby Boomers+)
351 2 3 4
Achieving Goals
% of millionaires willing to pay more for an advisor who:
Helps me on an ongoing basis as I try to stick to my
financial plan to reach my goals
(52% Gen X/Y vs. 36% Baby Boomers+)
Helps me think about the long-term and not make short-
term decisions that may poorly impact my finances “Being able to meld goals with reality and provide the long term roadmap. That’s
(46% Gen X/Y vs. 42% Baby Boomers+) really the biggest thing. We understand what’s on the horizon, but being able to
put that together into a workable solution is what I’d be looking for.”
Creates a holistic financial plan for me based on my
long and short-term goals Reva, 36, Accountant
(39% Gen X/Y vs. 35% Baby Boomers+)
Provides concierge services and referrals to other service “[An ideal advisor] is somebody who can give you not just advice on how to get
providers, e.g. tax accountants, lawyers started, but a long term roadmap of how you need to approach things… [I’m] not
(32% Gen X/Y vs. 20% Baby Boomers+) necessarily looking for day-to-day advice – ‘buy this today, sell this tomorrow,’ but
‘here’s what we want to be doing now, here’s what our goals are five years from
Helps me make better healthcare decisions in order to
now, 10 years from now.’ And, monitor those goals along the way.”
manage cost more effectively
(32% Gen X/Y vs. 16% Baby Boomers+) Justin, 35, Lawyer
Offers more socially responsible investing strategies
(e.g., companies that are ‘green’, support social causes, etc.)
(30% Gen X/Y vs. 11% Baby Boomers+)
361 2 3 4
Peace of Mind
% of millionaires willing to pay more for an advisor who:
Takes the time to educate me on all of my
financial options
(55% Gen X/Y vs. 43% Baby Boomers+)
Helps me organize and simplify my financial life
(43% Gen X/Y vs. 32% Baby Boomers+)
“Peace of mind. For me, it just comes down to a professional signing off, looking
Makes financial decisions easy for me at my whole financial picture, and making sure I'm not missing anything.”
(42% Gen X/Y vs. 42% Baby Boomers+)
Jessica, 32, Real Estate
Can help me make decisions related to the care
of a parent or dependent
(34% Gen X/Y vs. 11% Baby Boomers+)
Would be the CFO/CEO of my life
(33% Gen X/Y vs. 19% Baby Boomers+)
371 2 3 4
Fulfillment
% of millionaires willing to pay more for an advisor who:
Helps motivate me to reach my life goals,
not just my financial goals
(32% Gen X/Y vs. 19% Baby Boomers+)
Firms that go beyond investment management
to provide other types of value will be better
“Sometimes the decisions you make that impact your financial future the
most have nothing to do with picking stocks. It's frequently more like:
positioned to serve Gen X/Y millionaires, and
should I buy this house or not? Or should I buy that business or not? capitalize on the growth of this segment.
Should I quit my job or not? Those have much bigger implications to our
long-term wealth than any stock we could buy.”
Colt, 32, CEO
381 2 3 4
“I feel like they're all connected, because any events in your life are going to
When presented with a range of available affect your assets. They're going to affect your money, so you're going to have to
services (below), affluent Gen X/Y investors in re-shift your plan… I would pay one flat fee for everything.”
Fidelity’s focus groups demonstrated their Caroline, 32, Programmer
willingness to pay more for a holistic approach.
They shared these sentiments:
“A flat fee for the investment management. I wouldn't pay anything extra for the
financial planning. But then, I'd go to twice the flat fee if it was all-inclusive.”
Dan, 39, Business Manager
Investment Management
Investment management only (selecting
“I would envision it as a flat fee to join the club. And then for any service that you
investments, asset allocation, etc.) chose within that, there might be an additional fee. But, not based off the
investable assets.”
Financial Planning Kelli, 48, Fitness Professional
Investment management plus a financial
plan focused on long-term goals
“If I paid X for investment management, I'd pay 25% more for financial planning,
and I would move up to 50% more for life needs if they can truly satisfy them.”
Life Management
Investment management, a formal financial Daniel, 27, Healthcare Consultant
plan, and expert advice to help with life
decisions (e.g., legacy, career, large purchases)
391 2 3 4
Peace of mind drives loyalty more than investment management.
Contrary to conventional wisdom, the top drivers of client loyalty (NPS® scores1)
for millionaires of all generations are found higher in the value stack. Not only are
Gen X/Y millionaires generally more willing to pay for these services, they (and
their Baby Boomer+ peers) are more loyal to advisors that deliver them well.
Top Drivers of Client Loyalty:
Fulfillment
Demonstrating consideration of the client’s unique
needs / goals / preferences
Peace of Mind
Really going out of their way to get to know the
client as a whole person, not just as a client
Achieving Goals
Trusting the advisor to make decisions in the client’s best interest
Depending on the advisor to keep the client on the right track Managing the Money
Including spouses / partners in financial conversations
Providing online access to statements, reports, financial
records via website / online portal
1. Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain &
Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
401 2 3 4
4 Actions to Consider
411 2 3 4 As we’ve seen, young millionaires are at a tipping point for engaging with advisors – or with your firm. Growth and profitability will likely be stunted if firms fail to take steps to demonstrate the value they can provide to Gen X/Y - both millionaires and non- millionaires - who are steadily increasing their income and assets. Advisors who succeed in engaging with younger generations will likely benefit from life-long relationships with clients, who are currently accumulating assets, and willing to pay for the value an advisor can provide. 42
1 2 3 4
As you look to engage Gen X/Y investors – both
millionaires and non-millionaires, consider these steps:
Few advisors survey clients regularly to assess how they are doing,
Gather client feedback on your approach to
1 optimize it
what they value, and how the firm can improve. Specifically look at
how the feedback may differ among Gen X/Y clients, so that you
can tailor your services to this market.
Examine your book of business to identify
2 opportunities and vulnerabilities
Additionally, even fewer advisors have client advisory boards to
help guide them. You may want to create a client advisory board
specifically for Gen X/Y clients to focus on their needs in particular.
Assess your technology strategy to keep pace
3 and find new ways to engage clients digitally Fidelity Resources that Can Help:
• Constructive Feedback:
How Client Advisory Boards Can Help You Improve Client Loyalty
Take stock of your team to ensure the right
4 skills and staff
• Take the Mystery Out of Improving Your Sales Process
• Deepening Client Loyalty and Potential Profitability
431 2 3 4
As you look to engage Gen X/Y investors – both
millionaires and non-millionaires, consider these steps:
Have you established relationships with your current clients’
Gather client feedback on your approach to
1 optimize it
children – those in the Gen X/Y population? This may be a
fruitful source of prospective clients given your relationship
with their parents.
Examine your book of business to identify
2 opportunities and vulnerabilities
Furthermore, are you segmenting your book to better meet clients’
needs, making sure to address the specific needs and challenges of
Gen X/Y?
Assess your technology strategy to keep pace
3 and find new ways to engage clients digitally
Fidelity Resources that Can Help:
• Segment for Success: Secrets from Firms Doing Client Segmentation
Take stock of your team to ensure the right
4 skills and staff
• Keeping It in the Family: Four Ways to Help Build Client Relationships Across
Generations
441 2 3 4
As you look to engage Gen X/Y investors – both
millionaires and non-millionaires, consider these steps:
Given the coming wave of wealth’s desire to collaborate and
interact online, how does your firm’s approach measure up?
Gather client feedback on your approach to
1 optimize it
Map out the steps in your prospect and client experience, and
identify how you're using technology to enhance the experience at
each step. Through this process, you may unearth opportunities
Examine your book of business to identify to better leverage technology that may streamline your
2 opportunities and vulnerabilities operations, too.
Fidelity Resources that Can Help:
Assess your technology strategy to keep pace
3 and find new ways to engage clients digitally
• Setting the Pace:
How eAdvisors Elevate the Client Journey and Outperform Peers
• Charge Up Collaboration With Clients And Prospects
• How You Can Add Value Through Holistic Financial Planning:
Take stock of your team to ensure the right
4 skills and staff
First Hand Takes From the Field
• An Introduction to Navigating Digital Advice
451 2 3 4
As you look to engage Gen X/Y investors – both
millionaires and non-millionaires, consider these steps:
Given that the Gen X/Y millionaire population generally is looking for
more than just investment advice, are you taking steps to go beyond
money management?
Gather client feedback on your approach to
1 optimize it Do you have the right skills to deliver a more holistic approach and
potentially help clients achieve their life goals?
Examine your book of business to identify
2 opportunities and vulnerabilities
Many firms find that hiring Gen X/Y advisors is the best way to
engage and serve Gen X/Y clients. What is your current mix of talent,
and are any changes needed to accommodate further growth?
Assess your technology strategy to keep pace
3 and find new ways to engage clients digitally Fidelity Resources that Can Help:
• The Truth About Talent:
Delivering Holistic Planning May Hinge on Whom You Hire
Take stock of your team to ensure the right
4 skills and staff
• Journey to the Top: Insights on Developing and Retaining Future Leaders
• Recruiting Redefined: Perspectives on the Looming Advisor Talent Shortage
461 2 3 4 Learning from the best practices of other advisors is another way to hone your strategy. The following case studies profile the approach and perspectives of three wealth management firms that are focused on serving Gen X/Y clients (both millionaires and non-millionaires), and may provide ideas for your business. 47
1 2 3 4
Firm Case Study: Abound Wealth Management
Headquarters: Franklin, TN
AUM: $161 million (as of 06/30/2017)
% of clients that are Gen X/Y: 48% (Gen X: 47%, Gen Y: 1%)
% of AUM with Gen X/Y: 45% (Gen X: 44%, Gen Y: 1%)
Average account size overall: $1.08M, Gen X: $1.01M, Gen Y: $396K
Ideal Gen X/Y Client Attributes: How Gen X/Y clients most differ from Changes to firm’s business model to Strategies for Gen X/Y acquisition
older clients: serve Gen X/Y clients: and engagement:
• For those 40 or younger, have at least
$300k in assets (including retirement • They view market drops as • Relaxed $1 million minimum to work • “The Money Guy Show” podcast and
assets). opportunities to invest vs. a concern. with high potential younger clients. video series that garners between
• For those over 40, have $750k in • They like tools that allow for scenario • Segmented clients by AUM – 18,000 to 30,000 views per episode.
assets (including retirement assets) planning and motivate them to save assigning the largest accounts to the Started in 2006.
• Saving at least 15-20% of their gross more. most experienced advisor, and the • Weekly blog on relevant personal
income each year. • Accustomed to a connected smallest accounts to the most junior. finance topics.
• Financially independent / retire early experience and quick responses. • Respond within a few hours to most • Active social media presence on
(FIRE). • Like frequent communications to client questions, within 24 hours at multiple channels.
keep them engaged and informed. the latest. • “The Smart Money Club” – online
• Appreciate younger staff and content library.
advisors to work with, and a more • Referrals from existing Gen X/Y
relaxed office environment. clients, particularly their parents.
• Effective website messaging and lead
generation tools.
One piece of advice for other firms:
Be selective. Focus on attracting only those Gen X/Y clients that exhibit the right behaviors around saving and investing.
The case study provided herein is provided for illustrative purposes only. Their business needs and experiences may not
reflect the experience of others. Abound Wealth Management is an independent company and not affiliated with Fidelity
48 Investments. Listing them does not suggest a recommendation or endorsement by Fidelity Investments.1 2 3 4
Firm Case Study: Massey Quick Simon & Co.
Headquarters: Morristown, NJ
AUA: ~$2.7 billion (as of 06/30/2017)*
% of clients that are Gen X/Y: 25% (Gen X:12%, Gen Y: 13%)
% of AUA with Gen X/Y: 12%
Average account size overall: $12.9M, Gen X: $8.1M, Gen Y: $5.7M
Ideal Gen X/Y Client Attributes: How Gen X/Y clients most differ Changes to firm’s business model to Strategies for Gen X/Y acquisition
from older clients: serve Gen X/Y clients: and engagement:
• Entrepreneurs, executives, asset
management professionals, • Highly informed. • Incorporated investments for non- • Ask for introductions to the children
inheritors. • Seeking an all-in-one solution. qualified purchasers and shifted to of current clients, and then
• HENRYs (high earning, not rich yet) more passive investments in customize the type of engagement
• Value working with people they can
with busy careers, who need an portfolios. based on needs (e.g. career or
relate to (e.g., similar age and
advisor’s help. • Assigned younger advisors to the college advice, financial education).
lifestage).
• Look for good incomes and earning accounts. • Leverage the professional and
• Lead with planning, because
potential. • Enforced minimum fee of $10k for all personal networks of younger
investments are less of a focus.
accounts. advisors.
• Want a strong technology platform
• Created in-house task force to • Active social media presence.
• Like to have more on-demand
develop and enhance the offering for • Frequent events for clients and
conversations.
emerging and next gen wealth. prospects that are social and fun.
• Participate on next gen board for • Involvement in a professional
local chapter of FPA. leadership organization.
One piece of advice for other firms:
If you are building an enduring firm versus a lifestyle practice, you need to build these connections and find the right Gen X/Y clients.
*Assets Under Advisement (AUA) includes assets for which Massey Quick Simon may not retain trading authority.
The case study provided herein is provided for illustrative purposes only. Their business needs and experiences may not reflect the experience of others. Massey Quick Simon & Co. is an independent company and not affiliated with Fidelity Investments.
49 Listing them does not suggest a recommendation or endorsement by Fidelity Investments.1 2 3 4
Firm Case Study: Securities America
Headquarters: La Vista, NE
AUA: $70.1 billion (as of 06/30/2017)
% of clients that are Gen X/Y: 30%
Average account size for Gen X/Y: $51K
% of advisors that are Gen X/Y: 42% (out of approximately 2,500 total advisors)
How do Gen X/Y clients most differ How do you support advisors in How do you support advisors in How do you support Gen X/Y advisors
from older clients?: acquiring Gen X/Y investors? serving Gen X/Y investors? who serve younger investors?
• Many of the stereotypes generally • Encourage advisors to establish a • Formed a next-gen advisory council • Launched a program to train and
aren’t true. For example, that Gen strong social media presence with an to gather intelligence on how best to mentor advisors under 40.
X/Y lack assets, are unwilling to pay up-to-date profile. serve Gen X/Y investors (comprised • Created next-gen workshops and on-
for advice, or want a digital advisor. • Recommend advisors create a of eight under-40 advisors). demand training on relevant topics
• There is a lot of business opportunity, content strategy for social media to • Provide a diagnostic tool for advisors (e.g., creating a fee-based business,
particularly among the children of stay top of mind for Gen X/Y. to assess revenue by household, discussing pricing/fees with clients).
current clients. • Develop content for advisors to use assets by age of client, etc. to identify • Initiated a coaching and mentoring
• They appreciate working with in various online channels, and risks and opportunities. program – pairing young advisors
advisors that are closer to them in suggest outside content providers to • Provide advisors with tools to go with a coach and a tenured advisor.
age. help them maintain an active online paperless and a robust tech. platform They meet every other week for a 12-
• They want advisors who have a presence. especially: online collaboration tools, week period.
paperless approach, and use • Provide advisors with tools to have mobile applications, and real-time
technology effectively. better conversations with Gen X/Y access to accounts.
• They check out an advisor’s online clients – e.g. marketing tools and • Enable and train younger advisors
presence and like to receive relevant client seminars. (see next column).
content from them.
One piece of advice for other firms:
One of the best ways to engage this group is to have people working in a practice who look like these investors.
Securities America is a wholly owned subsidiary of Ladenburg Thalmann Financial Services Inc.
The case study provided herein is provided for illustrative purposes only. Their business needs and experiences may not
reflect the experience of others. Securities America is an independent company and not affiliated with Fidelity Investments.
50 Listing them does not suggest a recommendation or endorsement by Fidelity Investments.1 2 3 4
Access additional resources from Fidelity to learn more about serving
Gen X/Y clients and how perceptions of value are changing:
Drivers of Value:
The New Value Drivers that are Redefining Your Business
Holistic Financial Planning: Help Redefine Your Value and Pave the Way for Growth
Building the Right Team for Your Client Portfolios:
How To Select and Combine Managers and Investment Vehicles
Prior Millionaire Outlook Studies:
Creating Advisor Advocates to Help Boost Referrals
Exploring Wealth Potential Across the Spectrum of Investors
51For additional insights and resources, please visit our website or contact your Fidelity Relationship Manager or home office.
For investment professional or institutional investor use only. Not authorized for distribution to the public as sales material in any form.
The 2017 Fidelity Investor Insights Study (a.k.a. The 2017 Fidelity® Millionaire Outlook Study) was conducted in two phases. The first was an online, blind study conducted during the period January 18th through
February 13th, 2017. It involved a total of 1,367 20-minute (on average) online interviews, with the sample provided by TNS, a third-party research firm not affiliated with Fidelity. The study was focused on
understanding affluent investors’ attitudes, goals, behaviors and preferences related to investing, wealth management, and advice. Target sample included respondents across affluence levels, from $50,000 to more
than $10 million in total investable assets, excluding any real estate or investments in 401(k), 403(b), pensions, or other employer-sponsored retirement plans. "Millionaires" are defined as those with $1 million or more
in total investable assets with the same exclusions just mentioned, which included 601 participants. The second phase explored the topic of the value of advice via a series of qualitative focus groups conducted with 51
investors in 3 geographically diverse locations (San Francisco, Chicago, and Boston). Participants were Affluent Boomer investors (52-70 years old, $1M+ in investable and/or retirement plan assets) or High-Earning Gen
X/Y investors (25-51 years old, HH incomes of $250K+ if married, or $150K+ if single and/or $1M+ in investable and /or retirement plan assets). Participants also represented a mix of both advice and non-advice users.
The information contained herein is as of the date of its publication, is subject to change, and is general in nature. Such information is provided for informational purposes only and should not be considered legal, tax, or
compliance advice. Fidelity does not provide legal, tax, or compliance advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Federal and state laws and regulations are complex and are
subject to change. Laws of a specific state or laws that may be applicable to a particular situation may affect the applicability, accuracy, or completeness of this information. This information is not individualized, is not
intended to serve as the primary or sole basis for your decisions, as there may be other factors you should consider, and may not be inclusive of everything that a firm should consider in this type of planning decision.
Some of the concepts may not be applicable to all firms. Always consult an attorney, tax professional, or compliance advisor regarding your specific legal, tax, or regulatory situation.
This communication is provided for informational and educational purposes only. Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, or to
give advice in a fiduciary capacity, in connection with any investment or transaction described herein. Fiduciaries are solely responsible for exercising independent judgment in evaluating any transaction(s) and are
assumed to be capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies. Fidelity has a financial interest in any transaction(s) that
fiduciaries, and if applicable, their clients, may enter into involving Fidelity’s products or services.
The third-party providers listed herein are neither affiliated with nor an agent of Fidelity, and are not authorized to make representations on behalf of Fidelity. Their input herein does not suggest a recommendation or
endorsement by Fidelity. This information was provided by the third-party providers and is subject to change. There is no form of legal partnership, agency, affiliation, or similar relationship among an investment
professional, the third-party service providers, and Fidelity Investments, nor is such a relationship created or implied by the information herein.
Fidelity Family Office Services is a division of Fidelity Brokerage Services LLC.
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