Caring for children and aging parents, 50-something investors need an advocate for their own best interests
In wealth management, we focus heavily on client milestones—the just-married couple, the single female buying her first home, clients ready to retire, etc.
But there’s a demographic I’m seeing that’s often overlooked in the current models: Fifty-somethings. Far from “just starting out” yet not “ready to retire,” this group is looking out for a more tailored customer experience. Only two out of five people aged 49-59 say they have a financial advisor actively helping them.
This group certainly has a number of needs advisors could help with, from funds planning to caring for aging parents and children, to inheritance and their own estate planning—not to mention looming retirement. Accenture’s Wealth in the Digital Age research revealed this demographic shows high interest in planning across all of these topics, with retirement ranking highest.
But first, a snapshot of this group from our research.
Adult children aren’t leaving the nest (yet). Half of 50-somethings who have children still have an adult child, aged 25 or over, living with them at home.
Lack of understanding and lack of trust reign. Only 35 percent say they have a good grasp of their investments and holdings. Yet, only one in four trusts an advisor to make investment decisions on their behalf.
Goals and actions might not be aligned. The three top desires for 50-somethings are retiring comfortably, keeping money safe and preserving as much wealth as possible. Yet, how many times do you hear a client in this age group say they’ve just given Junior money for a house down payment?
Less satisfied than any other group. Fifty-somethings have the highest dissatisfaction with financial advice of any age group in our research. One in three is “highly dissatisfied.”
The good news is, this profile leaves plenty of opportunity on the table for the industry to address. When I talk to wealth managers about the possibilities, we usually cover a few key areas:
Empathy. Yes, I’m leading with a “soft” issue. In reality, I believe empathy is anything but soft as it’s linked to hard numbers. Empathy is what humans can do that no robo-advisor can. Fifty-somethings come with the complexity of a full life. We may see peak earning years, multiple residences, divorces, late-in-life marriages and remarriages, college tuition, aging parents’ medical bills, etc. And that’s just the tip of the iceberg. Are clients still carrying a hefty mortgage, with only a decade until retirement? Are they paying children’s student loans, putting that retirement at risk? The number and types of situations can be mind-boggling, but only if you know your client. And your human advisors can help clients in such complex, nuanced situations. Digital advice works more for the straightforward, not for the complex human aspects of wealth management during these years.
Human-centered design. By designing offerings, services and a client journey from their perspective, you could be far more successful than when throwing a standard mix at 50-something clients. Some firms are moving toward human-centered design involving clients from the start, basing advice on life pictures rather than standardized one-size-fits-all scenarios. TD Bank has been bringing client voices into its approach for several years with its Discovery Tool that uncovers an investor’s wealth personality and financial blind spots, which allows advisors to deliver personalized financial planning across the board. TD Bank also recently partnered with the University of Toronto to bring additional behavioral finance resources and applications to TD Wealth clients. Doing this for 50-somethings could help your firm better map structured products versus non-traditional investments, tapering aggressive investing at the right pace, etc.
Behavioral economics. Wealth is an emotional topic for most investors; whether they realize it or not they have biases. If your firm could help put rationality and transparency into investment decisions and planning, you’ve done your 50-something clients a huge service. Manulife Investment Management is training its advisors in behavioral economics. The firm saw many clients pull out of the market during the 2018 downturn, with December 2018 beating even October 2008 in terms of one-month outflows. Teaching advisors ways to combat their own biases, as well as those of clients, makes for wiser long-term investing. Pimco takes the subject so seriously that it recently hired a Nobel Prize laureate to serve as senior adviser on retirement and behavioral economics. Fifty-somethings are dealing with issues rife with emotion—kids, parents, the security of their “golden years.” They’re likely more in need of this, with the multiple pressures they’re under, than other client groups.
There’s so much more I could mention—digital coaching, innovative new products that meet 50-somethings’ unique needs, and more. But that’s a conversation, not a blog. If you’d like to have that conversation, please email me, Gregory Smith. I’d be happy to discuss this topic—which I find fascinating—in depth.