While New York City is largely considered the financial capital of the world, some sparsely populated places — beachy Hawaii, snowy Maine, and mountainous Montana — may have more potential for advisors to find new assets.

According to a recent SmartAsset report, unique state characteristics can create opportunities for niche advisors. The data highlighted regions with growth potential that might fly under the radar for even the most plugged-in advisors. Despite having a population of just 1.1 million, Montana, for example, ranked sixth on the list because clients tend to require more estate planning services amid generational ranch sales, said Bozeman-based Eric Flynn, head of wealth management at Compound Planning.

“There’s an aging rancher population,” Flynn said, “so there’s a lot of generational wealth being created.”

Rich-Back Mountain

States often have specific areas where financial planning services are needed most, and the data found opportunities for advisors that may still be “left on the table,” said study author Jaclyn DeJohn. “If everyone thinks, ‘Oh, New York is where the money is, that’s where I should set up my RIA and practice…’ The potential AUM starts vanishing pretty quickly,” she said. The Treasure State also has what Flynn calls the “Yellowstone phenomenon” — based on the Western drama starring Kevin Costner — which influenced people to buy ranch land and second or third homes in the mountains. The three highest-ranking states in the report are:

• Hawaii, which had the most consumer AUM per advisor at $917 million per advisor and 140 active advisors as of June;
• Maine, which had the second-highest AUM per advisor at $501 million per advisor and 162 active advisors;
• And New Mexico, which had the third-highest AUM per advisor at about $200 million per advisor and 179 active advisors.

One reason for Hawaii’s and Maine’s dominance may come from their remote geographic locations, DeJohn added, hence their low advisor counts, with both states also attracting wealthy vacationers.

Tech Stack. Washington, which ranked fifth, benefits from its large proportion of high-salaried tech workers, with roughly 1 in 10 residents employed in the sector. A lot of this wealth comes in the form of company equity, said Eric Franklin, co-founder of Prospero Wealth, which caters to tech clients. “Amazon, Microsoft, Meta, Google, Apple — these are companies that have had very, very healthy stock prices for a very long time, and so… there’s a significant amount of taxation involved with accessing that accrued equity,” he said. “There’s a lot of tools in that concentrated equity space that present big opportunities for advisors who become experts in helping clients navigate that area.”

There’s a reason why they’re called private markets: Most clients aren’t welcome. However, iCapital just got a lot of fuel to help change that, raising more than $820 million in new financing last week. Not only is this good news for the fintech firm, which specializes in alternative investing, but it’s the next step in making private assets more accessible to a wider range of clients.

“Think of it as a validation of a fundamental shift that’s been building for years — the democratization of alternative investments that were once exclusively available to pension funds, ultra-high-net-worth investors and the like,” said Will Trout, Datos Insights’ director of securities and investments.

I Need My Privacy

Private markets are standard fare for pensions funds and endowments, but they’re increasingly becoming part of wealthy clients’ portfolios. Almost a third of advisors plan to allocate at least 20% of their book to private markets this year, according to a Hamilton Lane report released in January. Another 29% said they would allocate 10% or more to alternatives.

The wealth management industry is witnessing the early stages of private market allocations becoming as routine as traditional asset classes, but with a few caveats, Trout told Advisor Upside. While they might become as easy to access as international equities for high-net-worth clients, mass-affluent investors will likely see simplified, evergreen fund structures that behave more like mutual funds, he said.

iCapital has been strategic in becoming an “essential infrastructure layer” connecting asset managers who create private products and wealth managers who use them in client portfolios, Trout said. “Another way of putting it: iCapital is positioning itself as the ‘plumbing’ for this transition, much like how Stripe became essential infrastructure for e-commerce payments,” he said.

The firm has big plans for its latest fund raising:

• The money will go toward new acquisitions, global expansion and tech innovations, according to a release
• It brought the firm’s valuation to more than $7.5 billion.

Bridge the Gap. The new financing is almost like a treaty between the old and new world of investing, and came from some of the top financial firms on the planet, Trout said. “T. Rowe Price, Apollo, Blackstone, and BlackRock recognize that the future of wealth management requires seamless integration of public and private markets, and they’re betting heavily on the infrastructure to make it happen,” he said.

We need to start making more friends.

Inheritance is often passed down to children and grandchildren. But Gen Z likes to buck trends. While about half of the young folks of today expect to leave something behind for kids and grandkids, roughly a third intend to pass inheritance on to their best buds, according to a Northwestern Mutual survey.

Gen Z’s plans may be a little out of the ordinary, but it’s a reminder to advisors that not every client will have the same goals and deciding what they want their financial legacy to be is a lifelong process. “As people grow older, sometimes, their relationships change and their priorities evolve,” said Aaron Channing, partner at Fortivus Wealth Group, part of Northwestern Mutual. He noted that only 5% of boomers intend to leave inheritance to their friends, while the majority will give it to family.

Strapped for Cash

The oldest Gen Zers and Millennials are 28 and 44, respectively, so finalized estate plans are decades away. Before they get to leaving something behind, however, younger cohorts are thinking about what they might be receiving in the coming years. Let’s just say it’s a little nerve wracking:

• Nearly a third of US adults plan to leave a financial gift, up from a fourth last year, the survey found. However, only a fifth expect to receive one, down from 25% in 2024.
• Plus, the majority of folks set to receive an inheritance say it is “critical” or “highly critical” to their long term financial security.

“Financial anxiety is an epidemic across the country right now,” Channing said. “We are typically supporting our clients with their estate planning goals, but we don’t always get to see how impactful an inheritance can be to the next generation.”

Family Meeting. That anxiety could lessen as many families are beginning to have the talk. Some 60% of Americans who expect to leave an inheritance say they have had a conversation with their family about their plans. It can be awkward and uncomfortable, but Channing recommends avoiding a one-and-done talk, and instead have clients, their children and advisors have the conversation over multiple meetings. Otherwise, you end up with a lot of gaps and confusion.

“The lack of a plan is still a plan,” he said. “It’s just not a very good one.”