The long game: Forward-looking advisers focus on next gen

Tuesday 18th May 2021 Penny Pryor

Progressive advisers are understanding they need to start servicing the clients of the future, even if they have very low balances or small investment portfolios when they first walk in their door. Many firms are looking to technology to help them serve this demographic, according to Dimensional Fund Advisors co-head of client group, Australia, Nathan Krieger.

Dimensional works with approximately 500 advisor groups across Australia and New Zealand and surveys these firms annually, to discern trends and challenges they may be facing.

Back to the future

Krieger says in the most recent survey they noticed an increase in tech spend by adviser businesses across the board.

“And whilst the tech spend for both large and small business [is rising] those firms that were experiencing greater growth were spending more time and money on using tech in their business,” he says.

A new focus for some advisers has been the HENRYs – or High Earners Not Rich Yet.

“Firms are using tech and trying to target the next generation,” Krieger says. [They] are deliberate with their intent to connect with that next generation that will inherent that money.”

In some instances, this involves putting currently asset poor clients on low retainers in order to develop relationships with them.

“Those progressive and forward-looking firms are thinking about the business not just that they have today but will have in the future.”

Local challenges

The most recent Dimensional survey of advice firms covered 937 firms in eight countries, the majority of which were firms not affiliated with larger financial institutions.

The survey found that while globally advice firms list finding new clients, developing marketing strategies and systemising workflow processes as their top challenges, in Australia the top challenge was managing compliance and regulatory change.

“We see that across the board. There is a lot of change. There has been a lot more change thrust upon the adviser today than in at least the 17 years I’ve been working with advisers at Dimensional,” Krieger says.

Krieger confirmed other studies that are highlighting how busy Australian financial advice firms are now, following a lull during the lockdowns, as the uncertain outlook makes people more concerned about their financial affairs.

“The ones that we have the good fortune of working with, they are very focussed on their client,” he says. “And I think some of the firms that are really clear about their value proposition … are actually finding things really good right now. They are working hard but they’re growing strongly.”

Sustainable future

The advisers Dimensional deals with are also responding to an increase in questions about sustainable and ESG investing from their clients.

“Sustainability is more and more discussed by advisers. It is more and more brought forward to them by their clients,” Krieger says.

Dimensional is also noticing this trend in increases to the flows into their four sustainable strategies. Currently those four strategies have approximately $1.8 billion in funds under management, of which $700 to $800 million flowed into the funds in 2020.

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