Win the next generation of high-net-worth clients

Key takeaways

• 75% of high-net-worth assets are held by clients over the age of 60, and the majority of their children are likely to leave their parents’ advisor when they inherit wealth.
• Advisors who recognize how next-generation clients are different and adapt their approach accordingly can turn a major business risk into a growth opportunity.
• Shifting the way you deliver portfolios, provide planning services and build trust can help you retain assets and capture new growth opportunities with the next generation of high-net-worth clients.

Adapt your approach to drive growth with the next generation

High-net-worth (HNW) households ($5 million+) will be transferring $62 trillion of generational wealth by 2048. Their assets are already moving to heirs at a rate of $1 trillion annually, and the pace will accelerate with the aging of Baby Boomers.¹

Clients over the age of 60 hold 75% of HNW assets today,² and the risk to advisors is significant as 70% of clients’ adult children are likely to take their inheritance elsewhere or choose to manage the assets themselves.³ Advisors can reduce asset attrition by engaging their clients’ heirs long before the wealth transfers. While 91% of HNW advisors involve their clients’ spouses in financial conversations, only 43% involve their clients’ children.⁴

Asset retention during the time wealth is inherited is a critical objective for advisors, but the next generation on its own presents new growth opportunities as they create their own wealth. Self-made Gen Z and Millennial business owners and high earners are likely to reach HNW status earlier in their lives than in prior generations.

Winning the next generation of HNW clients requires advisors to rethink how they position their value, deliver advice and cultivate relationships. That starts with understanding how young investors are different and deliberately adapting your approach across three key areas: portfolio strategy, wealth planning and trust-building.

1. Redefine portfolio strategy for next-generation HNW expectations

Next-generation HNW clients approach investing with a different lens. While your current clients are likely comfortable with conventional allocations, younger clients prefer innovation and customization. They expect real-time transparency and digital access to their investments, and many want to be involved in portfolio decisions and learn from you. Adapt your portfolio strategy to resonate with this informed and inquisitive client base by delivering on their preferences:

• Education-driven portfolio construction. Many younger clients want to understand not just what they own, but why they own it, making education an important component of your investment services. Show them how their portfolios are constructed and explain how you manage risk and reduce tax costs.

• Values-aligned investments. For many younger clients, their portfolio is an expression of their identity. In addition to the traditional drivers of capital gains and dividends, personal considerations significantly impact their investment decisions. Customizable model portfolios or separately managed accounts (SMAs) can help you deliver tailored solutions for a variety of investment goals.

• Alternative investments. 72% of investors between the ages 21 and 43 believe it is not possible to achieve above-average returns by investing solely in stocks and bonds.⁵ Offer exposure to alternative sources of potential growth including private markets, real estate and digital assets.

• Tech-enabled transparency. Younger clients are digitally fluent and expect around-the-clock access to their portfolio information. Provide digital interfaces that include analytical tools and real-time performance tracking.

Given the availability of advanced investing tools and digital platforms today, younger clients could invest on their own if they want to. If your value proposition focuses on investment performance alone, you will be competing against AI bots for their business.

Instead, focus on what you do that makes you valuable to them. They want you to discuss investing and goal-based planning ideas with them, answer their questions and help them make sense of financial information and market volatility. Position yourself as a trusted guide who helps them navigate important decisions.

Personal considerations are important drivers of investment decisions for the next generation
Investment decision considerations by age

2. Align wealth planning with next-generation client priorities

Younger HNW clients are navigating non-linear careers, entrepreneurship and multiple side hustles. Their income can be volatile due to equity compensation, start-up exposure, bonus-heavy pay structures or income streams across geographies and digital currency platforms.

Reframe wealth planning conversations with younger HNW clients to expand from the traditional preservation and legacy to include flexibility, growth and optionality. Integrate their financial plans with their evolving real-life priorities. This might include liquidity needs tied to business ownership, planning for milestones such as home purchases, education funding, philanthropy and traveling, or complex tax and international considerations.

Take a practical approach to the HNW services you provide. While wealth transfer planning may not be top of mind for them, younger clients often need estate documents earlier than previous generations due to a faster creation of wealth. On the other hand, there may be services you provided to their parents that they don’t need yet given their level of wealth or life stage.

Don’t assume younger clients understand why you serve them the way you do. Clarify how their needs differ from their parents and how the services they receive will evolve with the stages of their financial lives. Communicating what they can expect now and in the future positions you as an essential partner rather than a periodic service provider.

3. Build trust with the next generation by responding to psychological needs

Forming durable relationships with younger clients begins with understanding their mindset. Having grown up during periods of market disruption, rapid technological change and a proliferation of financial content across digital platforms, next-generation clients tend to be informed but skeptical and often have strong opinions. Earn their trust by responding to their psychological needs:

• Empathy. Younger clients are less receptive to top-down advice and prefer collaborative dialogue. Lead two-way discussions that acknowledge their views rather than deliver information from an authoritative standpoint.

• Clarity. Social media, podcasts and news reports inundate younger clients with content about money and investing. Help them filter and interpret the overwhelming flow of information and provide perspective on the markets.

• Consistency. Communicate frequently, especially during periods of market stress. Stay active on social media platforms where your younger clients engage, maintaining a consistent cadence of posts and a tone that is consultative and authentic, not salesy.

• Transparency. Build credibility with younger clients by proactively clarifying the scope of your services and explaining your fees. Have honest discussions about risks and costs in their portfolio. Provide factual context around market events and volatility versus pep talks.

Turn generational wealth transfers into a growth strategy

The Great Wealth Transfer can be a looming risk or a significant growth opportunity for your business. Adapting your approach to delivering portfolios, providing planning services and building trust can help you retain assets through multiple generations of HNW families and capture new flows as wealth continues to shift.

The BlackRock Business Consulting team can help you strengthen your strategy for attracting and serving the next generation of HNW clients. Contact your BlackRock representative and explore our free online HNW practice management resources.