Are younger clients worth it? Computer says no

Data analysis shows young clients get larger trading discounts than older ones, are less profitable -- and are more likely to dump their advisers

Young clients are getting the best deals on trades from financial advisers, a new analysis concludes, despite their smaller trades and account sizes.
Even though young investors, those 20 to 39, trade less and have lower average account balances, they average a 36% discount on trades — the highest of any age group, according to a PriceMetrix Inc. study released Thursday.
Those 40 to 64 receive an average 33% discount, and those over 65 get a 32% discount, on average, the analysis said.
Due to that high discount level, the revenue over assets is lower for younger clients than those in the 40 to 64 group, according to the analysis of investors and advisers at full-service North American retail wealth management firms.
Specifically, the ROA was 0.68% for those between the age of 20 and 30. In comparison, clients aged 40 to 64 generated a 0.82% return on assets, the study found.
Younger clients also close accounts at a higher rate than older investors, the analysis said. About 17% of accounts that were opened during a given year by the younger clients were closed less than a year later.
“As advisers patiently wait for their young clients to accumulate more wealth, they should ask themselves if it’s worth it,” the report said.
The average trade size of the youngest investors was $11,500, compared with $17,500 for those 40 to 64 and $19,500 for the oldest group, according to the study.