Young Australians chronically ‘underserved’ by advisers

Founder and director of Omura Wealth Advisers Terry Vogiatzis told ifa that, due to a combination of “industry practices and perceived profitability”, Australians under 40 are being routinely “underserved” by advisers.

“Financial advisers have an ethical obligation to ensure clients receive value for the money they pay. With this in mind, many advisers believe it is uneconomical given the time and compliance costs associated with serving younger clients, whose financial portfolios are typically smaller,” Vogiatzis said.

“A significant portion of advisers are also more comfortable focusing on retirement strategies, which tend to be more relevant to older clients prioritising their superannuation.”

Vogiatzis explained that the Delivering Better Financial Outcomes (DBFO) reforms, such as the changes to statements of advice (SOA) expected in tranche two, should improve advisers’ ability to provide younger clients with simpler, more affordable advice.

“This approach allows young Australians to access affordable financial guidance without unnecessary complexity or expense, ensuring they aren’t left behind as the financial landscape evolves,” he said.

“By embracing these flexible models, the industry can integrate more efficient financial engagement with the younger generations, who often feel disconnected from traditional advisory services.”

Vogiatzis added: “Whilst there is a current affordability crisis, people forget that affordability is a relative concept. Unless a client does not have enough money to pay for the advice, it comes down to a cost-benefit calculation. If advisers can quantify the value they add, clients will still be in a better position after paying for the advice.”

Taking advantage of this gap in the market

When it comes to attracting younger clients, Vogiatzis stressed the need for advisers to foster strong referral relationships with both clients and other financial services professionals.

“Gaining confidence and building a strong reputation by servicing younger clients can create a valuable referral network – a satisfied client is likely to refer to similar individuals,” he said.

“To maximise this potential, it’s crucial to communicate effectively with referral partners like accountants and brokers, who may mistakenly believe you’re not interested in helping younger clients. Highlighting your services tailored for this demographic can help bridge that gap.”

With younger generations tending to favour digital forms of communication, he also encouraged advisers to utilise emerging technologies in their service offerings to cater to their preferences, while also enhancing their efficiency and reducing costs.

“This digital-first approach not only enhances convenience for your clients but also resonates with a younger demographic that values speed and accessibility in their interactions. By adapting to their preferences, you demonstrate a willingness to meet their needs, allowing for stronger client relationships,” Vogiatzis said.

“Additionally, financial advisers can foster long-term relationships by taking a longer view of client profitability, investing in the relationship, and being upfront about which strategies will offer real value.

“Creating efficient, client-centric processes and offering values-driven advice will help advisers establish lasting loyalty with this new generation of investors.”

Long-term benefits

While cost is an ongoing issue for younger clients, both in their ability to afford advice and the cost to serve them, Vogiatzis argued that advisers need to be playing the long game, engaging clients who they could develop decades-long relationships with.

“It is crucial for financial advisers to attract and service younger clients, as they represent the future of the financial landscape. Building relationships with this demographic early allows advisers to grow with them throughout their lives, adapting advice as their financial needs evolve,” he said.

“By engaging younger clients from the outset, advisers can help them establish solid financial foundations, setting them up for better long-term outcomes. This early guidance fosters trust, loyalty, and the potential for deeper, lifelong partnerships, benefiting both the client and the adviser.

“Additionally, by nurturing these relationships, advisers can create a loyal client base that continues to generate value as their wealth and financial complexities grow over time.”

Furthermore, as Australia begins to undergo the generational wealth transfer that is set to see $3.5 trillion change hands by 2050, it is essential that advisers are able to meet the needs of those set to inherit assets to strengthen the future of their business.

“These beneficiaries may lack experience in managing large sums of wealth and need guidance on how to structure it effectively. Advisers can help them avoid costly mistakes and make informed decisions about their financial future,” he said.

“Providing advice to younger clients who are the future beneficiaries of this wealth transfer can encourage them to assist their parents with estate planning, ensuring wealth is transferred efficiently. For example, this might involve the consideration of testamentary trusts.

“Financial advisers may need to factor in an expected inheritance when planning for a client’s future. Whilst it could be argued that it’s not guaranteed and shouldn’t be relied upon, ignoring an imminent inheritance could push a client up the risk curve to meet their objectives unnecessarily. Here, advisers must exercise professional judgement.”