Amidst the dynamic shifts occurring in the RIA market, a significant opportunity is being overlooked.
That’s the viewpoint of Pamela Cytron, President of The Founders Arena WealthTech Accelerator, a pioneering public-private initiative that aims to create a collaborative ecosystem, bringing together entrepreneurs, investors, industry experts, and the local community to foster a supportive and inclusive environment for innovation and entrepreneurship.
Cytron feels that the focus of succession planning should also include young entrepreneurs, not just older advisors or business owners, because many young entrepreneurs have businesses that will also require a financial transition or exit plan as they grow older.
These emerging entrepreneurs are not only acquiring wealth at younger ages, but they’re doing so at an unprecedented pace, with early retirement on the horizon. In our recent interview, Cytron underscores the unique characteristics of this niche—a small but emerging group of young people who have found early success, despite the narrative that all GenZ’s and millennials are struggling financially.
The New Face of Wealth
Advisors have generally focused succession planning on the familiar: a white male business owner seeking a payout through an exit of some sort. However, there’s a significant shift in who’s wealthy. A more diverse entrepreneur is emerging who is cashing in big—or is about to. Their gender, race, sexual orientation, and age (they’re young) may surprise you because they are not those the industry would focus on. They’re new to wealth, smart, and their money comes from places we never expected, says Cytron.
“We’ve got a market of under-25-year-olds that will be making more money than previous entrepreneurs, and many are already doing it. The creator economy, which is heavily geared toward Millennials and GenZ, is presently valued at $250B and could approach half a trillion by 2027, according to a recent Goldman Sachs report. These young entrepreneurs need succession planning,” adds Cytron. “Advisors are missing out because they’re still stuck on their past customer base instead of their future one.”
Another sector is young athletes, including NCAA college athletes who are now eligible for compensation and are raking in big dollars thanks to new regulations around NIL (Name, Image, and Likeness). Local endorsements from banks, clothing companies, etc., add to the dollars they earn to play sports. This is the first time in U.S. history that undergraduate students are acquiring wealth while still in school. Without proper succession planning, they risk losing it all.
“Some of these college athletes are leaving college early because they’re getting a signing bonus of millions. However, the average NFL player goes bankrupt five years after leaving the sport. That is a problem that advisors should seek to solve—a perfect example of how succession planning can help. A big focus area should be financial education,” comments Cytron.
Adding Guardrails to the Game
During the interview, Cytron stressed that if professional and amateur sports don’t put some guardrails up to protect these young entrepreneurs, it’s incumbent upon the wealth management industry to do it. We must think of these twenty-somethings as a business—they’re both the business and the business owner.
“If we, the wealth industry, don’t put guardrails up, think about the unintended consequences of that much money on the street. Not all of these young people have financial education or someone to help manage their money and save some of it for their ‘retirement.’
They get a million-dollar signing bonus, buy a house for their mom and themselves, and a car for another person. The reality is they spend, spend, and spend. Even $100,000 or $50,000 of their monthly income invested and managed properly can accumulate to a million dollars or more,” she adds.
Driving Succession in the Right Direction
When discussing succession planning, the wealth management industry needs to look at it at all levels and industries, including the client, regardless of their age. This is our opportunity to make people perceive wealth management as everyone’s opportunity—not just for the wealthy.
“All of a sudden, the money is coming from someone who wouldn’t likely be a prospect. But all I keep hearing about is The Great Wealth Transfer from the baby boomers. Most importantly, I think we’re looking in the wrong areas, and the industry is losing sight of the young entrepreneur, sports celebrity, or influencer poised to make millions of dollars in a short period,” comments Cytron.
Using technology to attract, educate, and initiate succession plans for these young and wealthy individuals is vital. They demand full transparency into their wealth and its management, all at their fingertips. This access is much different from that of the Boomers, many of whom prefer a sit-down session with their wealth advisor. The young and rich, or those who will be rich, are using social technology, and advisors can reach them there.
“I think the best thing is for advisors to share relevant, factual information and not comment on it. There’s a fine line between being a fiduciary or a salesperson. Too many advisors make the mistake of a sales pitch on social media and completely lose these entrepreneurs,” says Cytron.
Supporting Emerging Wealth Managers with Education and Innovation
Cytron emphasizes the importance of supporting both new and established wealth through education and innovative tools.
“Young wealth managers are emerging with a fresh perspective on wealth management, focusing heavily on education and leveraging the latest trends and technology,” says Cytron. “These managers are not only well-versed in traditional financial strategies but are also keen on integrating cutting-edge tools to provide a holistic solution for wealth management.”
“By adopting modern technologies and staying ahead of trends, these young professionals are equipped to support both new and old wealth effectively,” Cytron adds. “Their approach ensures that wealth management is accessible, transparent, and tailored to the needs of a diverse clientele, from tech-savvy millennials to established investors looking for innovative solutions.”
In closing, Cytron discusses that existing WealthTech solutions may have hit the market for certain sectors of the young and wealthy. However, it’s lacking and outdated and will not work for the ‘new generation’ of self-made wealth. That’s why The Founders Arena is poised to help fintech founders drive succession planning in the right direction.
