Serving older clients poses challenges for younger advisors

By Rosemary McCracken | February 20 2014 07:28PM

Seniors are the fastest-growing demographic in Canada. According to Statistics Canada, Canadians age 65 and older will account for more than a quarter of the population by 2036. This poses major challenges for financial advisors who will be serving an increasingly older clientele.“Our business holds great opportunities for talented young people,” says Christopher Stewart, a financial advisor with Edward Jones in Halifax. “Many of our current financial advisors will retire in the next five years.”

But with those opportunities come the challenges of earning the confidence and trust of a demographic that is not monolithic. Advisors’ “older” client base is now made up of two distinct groups: the baby boomers, born in the post-Second World War baby boom and now between the ages of 50 and 68; and another group of clients who are in their 70s and older. Some members of the 70-plus group grew up in the Great Depression, and these men and women value thrift, discipline and hard work. They may have reservations about working with young advisors, noted Surven Lal, BMO Financial Group’s regional sales manager for Vancouver and Richmond, B.C., because they think young professionals may know nothing about the realities of their lives. “They may ask the advisor his age, reasoning that the older he or she is, the greater the experience. Advisors should tell them their ages. They should also tell them what work they’ve done in the financial services industry and for how long.”

The 70-plus group will be impressed by advisors’ financial planning designations, said Rhonda Latreille, chief executive of Age-Friendly Business, a Vancouver-based consultancy that teaches businesses and professionals how to work with the 50-plus market. “List your designations and explain the training you took to earn them,” she said. “And tell them what this training enables you to do for them. They’ll also want references and testimonials from your clients. They’re not about to take risks with the people who manage their money.”

Boomers, on the other hand, grew up embracing the spirit of personal freedom of the 1960s, and most of them will be open to working with younger professionals with good qualifications. “Boomers appreciate that younger professionals will be there for them as they age,” Stewart said.

Spirit of partnership

“Boomers expect to come to the table in a spirit of partnership,” Latreille said. “They want to work with advisors, want to be involved in all the decisions. And they won’t put up with being patronized. They’ll want to know about your professional networks because they want to work with the best of the best.”

But winning the business of both boomers and members of the 70-plus group goes beyond qualifications and referrals, added Latreille, a middle-group boomer in her late 50s. “As a consumer, I want to know that anyone serving me is up on the latest – that’s a given. But if you don’t know anything about me and my goals, I’ll just be getting a cookie-cutter service. I want to know that you understand my values and goals, and that you can work with me to realize them.”

Advisors who can show empathy for their clients are likely to retain their business, and this trait is even more important when they are working with older individuals. “Advisors need to understand how my life reality is different from that of someone age 30 or 40,” Latreille said. “Financial planning is just a tool to help me realize my goals, achieve the quality of life I want.”

Life stage approach

Lal manages a team of BMO financial planners, and he recommends that they take a life-stage approach to financial planning. By segmenting clients according to their age groups, he believes that advisors can better understand the challenges they face. “For clients in their 20s, this will probably mean saving for a home, opening an RRSP and paying off education debt,” he said. “For people in their 50s, it will mean discussing their approaching retirement.”

Older clients, he added, are at a stage of life when they may be facing several emotional issues: “End of careers, end-of-life issues, whether their assets will see them through till the end of their lives.”

Clients’ attitude to money will have a big impact on whether they can expect to outlive their assets. Members of the 70-plus group may be good at putting money aside, but may not have considered the eroding effects of inflation on their savings. “I ask them to think back to their first experiences with money,” Lal said, “and that usually tells me that they are savers who have prepared for a rainy day. They grew up thinking Canada Savings Bonds were the safest investment in this country, and they considered guaranteed investment certificates high-risk. We now have to educate them to understand that they need to look at different options to stay ahead of inflation and taxes.”

The 70-plus group’s attitude towards money is one of stewardship, Latreille added. “They want to leave a legacy.”

The boomers’ relationship to money is much different. Many leading-edge Canadian boomers, born between 1946 and 1955, enjoyed the prosperity of the post-war era that enabled them to get good educations and find good jobs. Money wasn’t a problem to come by, and they enjoyed spending it.

“Boomers may want to pass their assets on to the next generation, but for now it is theirs,” Latreille said.

And boomers’ free-spending habits may undermine their financial security in retirement. Lal noted that boomers who are downsizing their homes are not necessarily investing the surplus. “Here in Vancouver, they are selling their homes for $1.3 million and buying condos for the same amount of money, or putting the surplus into vacation homes. An advisor needs to understand what these clients want and what they need, which may be mutually exclusive. They may have company pensions, look forward to collecting CPP and OAS, and have a home that is paid for—and think they are all set. But they may not understand that their assets may not sustain the lifestyle they want.”

The unknowns of longevity, rate of return and rate of inflation are especially important for the boomers, Stewart said. “Often the conversation needs to be about financial planning – especially spending and debt reduction, and the client’s expectations for retirement – rather than about the portfolio.”