Key client groups for advisers looking to ‘future-proof’ their business

State Street’s 2024 Influential Investor Segment Study analysed the opinions and trends of what it identified as the key types of investors in the United States that advisers should focus on to help ensure future growth.

Brie Williams, head of practice management at State Street Global Advisors, said the study identified “hybrid investors, women, Gen-X, and Millennials, as pivotal pathways for advisers looking to future-proof their business”.

“By strategically integrating these high-growth investor groups into their client segmentation strategies, advisers can enhance their ability to attract and retain clients, gaining a distinct competitive advantage,” she said.

“The findings from our study underscore the opportunity for advisers to embrace a growth mindset and tailor their services around investors’ preferences and objectives, rather than trying to fit clients into existing offerings.”

State Street added that three key themes emerged from the study across these investor cohorts, specifically a strong desire for collaborative relationships with advisers, a heightened demand for modernised technology and tools, and a clear expectation of competitive fees aligned with a compelling value proposition.

Hybrids

Hybrid investors are identified as those who utilise a combination of a traditional financial adviser and at least one self-directed account, valuing both guidance and independence when investing.

“Hybrid investors value financial autonomy, yet they also recognise the benefits of professional advice. While 67 per cent collaborate with an adviser on investment decisions, they remain empowered to oversee a portion of their portfolio independently,” Williams said.

State Street warned that hybrid clients are hyper aware of costs related to investing and thus more sensitive to high advice fees, posing a risk for advisers with non-competitive fee structures.

Williams added: “Hybrid investors’ willingness to collaborate with an adviser only goes so far, as this cohort is quick to reconsider the relationship if they perceive subpar outcomes and higher fees.”

Millennials

Millennials are the fastest-growing generation of investors in both numbers and investable assets, State Street said.

The study found that advised Millennials are more likely than other generations to engage their adviser for more holistic advice, seeking guidance on cash flow management, insurance, private banking, and debt management, posing a greater opportunity for advisers.

“With their tech-savvy and research-driven approach, they bring distinct expectations to the table. To remain relevant, advisers must adapt to this evolving landscape, leveraging customer experiences to meet the Millennials’ needs,” Williams said.

Gen X

According to State Street, Gen Xers have often been underserved in financial services despite being at a pivotal point in their lives, with some quickly approaching retirement, and others managing the care of children or parents.

The study revealed that over 50 per cent of Gen X are self-directed investors, 41 per cent of which indicated they were frustrated with “no guidance or sounding board” from the self-serve platforms.

Despite the apparent desire for financial advice within this generation, many still are not engaging an adviser, which State Street said, “comes down to fees and the overall experience”.

“The top reason cited for not working with an adviser is the perceived lack of value for the fees (45 per cent),” Williams said.

“For Gen X investors who had previously worked with an adviser, it came down to increased costs (37 per cent) and unfulfilled promises (20 per cent) as the primary reasons for leaving, prompting them to turn to online services and investment websites for market and investment insight.”

Women

Similar to other groups, the study found that 50 per cent of women were self-directed investors, with the remaining half split almost equally between advised-only (26 per cent) and hybrid (24 per cent).

Those taking on investing independently were found to be more likely to utilise online tools to help them make investment decisions, indicating the desire for assistance in some capacity.

“Women investors are leading the charge towards financial empowerment, yet many still strive for greater security. Their journey is not one of despair, but of resilience in navigating the unique challenges they face on the path to financial well-being,” Williams said.

“With a focus on retirement and long-term planning, women investors are poised to seek advisers who prioritise strategies addressing longevity risks and retirement income solutions.”