How Can You Meet the Needs of the Next Wave of Wealth?

Most financial advisory and financial planning firms are designed to serve the needs of older, wealthier clients. But financial professionals who continue to prioritize these “traditional” clients may be missing out on the “Next Wave” of wealth—the top 10% of earners under 50 years old.

Generation X and Millennials are entering their prime earning years and beginning to inherit wealth from Baby Boomers. It’s estimated that, by 2030¹:

• Households headed by Gen X and Millennials—those around 25-55 years old—will control 47% of the wealth in the U.S., compared with 45% for Baby Boomers.
• Gen X and Millennials will inherit more wealth than Baby Boomers.
• Millennials will hold five times as much wealth as they do today. 

These are compelling prospects for the “Next Wave” of wealth. Yet, the financial industry continues to focus on older and wealthier “traditional” clients.

Securing clients still in the accumulation phase of their lives, with many high-earning years ahead of them, is crucial to the ongoing success and growth of your practice. And if you plan to eventually sell your practice, having a client roster of younger investors will increase its value.

The financial practices with the fastest-growing revenue are already pursuing these younger investors; the top 25% of practices have a much higher percentage of Next Wave clients than the bottom 25%.

To help you better understand, communicate with, and serve this next generation, T. Rowe Price conducted research into the Next Wave of Wealth. The Next Wave thinks about their finances differently than traditional investors.

Younger investors have lived through turbulent times. In their adult lives, they’ve seen two major recessions, war, and a global health pandemic—resulting in a “scarcity mindset.”

They rarely feel confident that they have enough money, prompting them to save at a higher percentage than any other group. While this may be a positive trait for wealth building, it also means they’re more cautious and distrustful of traditional markets and investments.

Even if these younger investors earn high incomes and hold substantial assets, they don’t feel wealthy and are often stressed about their finances. This mindset shapes how the Next Wave approaches investing in some significant ways: 

• They lack confidence that they’re on track for their goals and seek financial security. As a result, they tend to be more conservative and risk averse than older investors.
• They view financial advice differently—many prefer to think of their financial professional as more of a “coach” than an expert. They’re looking for help with their overall financial health, not just their investments, and prefer someone who motivates and helps them take regular steps toward their goals.
• They have twice as many pain points as traditional clients and different concerns. For example, saving for retirement is not top of mind for these investors; they’re equally focused on near-term goals, like building an emergency fund and buying a first home.

Many advisors focus on clients who are either transitioning to retirement or already in retirement. But Next Wave investors—with competing financial priorities—aren’t focused solely on retirement.

Unfortunately, when they look to the financial industry for answers to their pressing problems, like how to save enough for an emergency fund or whether to purchase a first home, they often don’t find answers. To Next Wave investors, it’s like their house is on fire—and financial professionals want to talk about building an addition.

How you prospect these clients should reflect how you can help them. Be sure your marketing materials demonstrate that you can answer their financial questions.

• Offer content about paying for education, building an emergency fund, or buying a house on your website.
• Think about how your social media posts can speak to the needs of younger investors and craft your messaging accordingly.
• Consider hosting a seminar on topics of concern to younger investors and encourage your older clients to invite their adult children to attend. 

Serving the Next Wave means not alienating them with financial jargon. For example, terms like "fiduciary," "holistic," and "wealth manager" can be confusing and off-putting to younger investors.

• Fiduciary: Many investors don’t know what this word means and assume that you’re using it to hide something from them. If you use this term, be sure to define it.
• Holistic: This conjures up images of healing stones and chakras.
• Wealth managers: Younger investors view this as serving someone with a “magical” amount of money, i.e., multimillionaires and billionaires. Remember, the Next Wave doesn’t feel wealthy.

Instead, opt for language that resonates with them. Try incorporating some of these terms and phrases into your messaging:

• Financial health
• Prepare for your future
• Long-term approach
• Protect your finances
• Customized
• Financial coach
• Goals-based

A young couple met with a financial professional seek advice about saving for their children’s education and minimizing taxes. The financial professional led with retirement—and stayed on that topic for almost the entire meeting. With just a few minutes left, he finally asked the couple if they had any other concerns. Unsurprisingly, this approach failed to address the couple’s needs, and they decided not to work with that professional.

This experience—recounted in a T. Rowe Price research interview—is all too common for Next Wave investors. While younger investors represent an appealing new source of clients to grow your practice, learning how to engage with them meaningfully is essential to your success.

Read our Quarterly Ideas to Engage the Entire Family for a list of topics to raise with younger investors throughout the year and find additional resources in our Prospecting the Next Wave of Wealth resource center, including educational white papers and investor presentations.