A Gen-XY model of wealth management

A Gen-XY model of wealth management

A Gen-XY model of wealth management

As wealth managers across Canada and North America see their clients make it to retirement, the challenge of gaining business from new, younger individuals is becoming increasingly urgent. And that means taking a critical second look at the value proposition that many advisors present.

In a new report, consulting firm Simon-Kucher asserted that the mainstay AUM fee model used by many firms is very difficult for Gen-X and Y clients, who typically have little in the way of liquid assets. Because of that mismatch, many clients with few investible assets wind up going to automated solutions with low minimums — and limited planning capabilities.

That creates an unfulfilled need for those with high incomes, complex financial situations, and many years left until retirement. The so-called HENRY (High Earning Not Rich Yet) clients, along with Gen Xers, lead complex financial lives — even if they don’t have complex asset-management needs — and their income gives them a capacity to pay.

To tap this emerging demographic, Simon-Kucher outlined a new approach. Referred to as the XY wealth management model, it’s associated with three definitive traits:

  • Clarity – instead of leaning on acronyms and jargon, firms that follow the XY model clearly describe in specific detail what their clients can expect to get from their fees.
  • Choice – firms that present an array of options, rather than the unidimensional AUM-based offering, can effectively serve clients with broadly similar needs that differ in certain key regards (e.g., amount of face-time needed with an advisor).
  • Transparency – providing direct fee pricing information up front shows clients that a firm has nothing to hide; in the case of higher-fee firms, it also screens for clients who are truly serious about retaining an advisor to help with their financial issues.

The report also laid out the different pricing schemes that firms can use as building blocks to form their proposition to clients. These include:

  • Periodic fees – monthly, quarterly, or yearly subscription fees. These are often expressed in ranges or explicit levels based on the complexity of the package offered or the client’s needs;
  • Up-front fees – typically paired with the periodic fee, it covers the initial barrage of planning activity that comes at the beginning of an advisory relationship. Generally differentiated based on client complexity, that preliminary financial investment can also help them build a mental commitment to the relationship.
  • Hourly fee – sometimes included in the main proposition laid out in client-facing materials, it’s an alternative for those who desire ad-hoc advice. It’s generally fixed, but also sometimes given as a range.
  • AUM model – while it’s the least remarkable for HENRY clients, it’s still present in more than two thirds of the models in a recent benchmarking study by the XY Planning Network, which provides members with services for Generation X and Y clients.
  • Project-based fee – meant for standalone engagements that don’t require ongoing commitment. It’s often built around the creation of a financial plan, though education is increasingly being offered as an alternative.


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