Fund managers have ridden the coat-tails of the baby boomers, ignoring the next generation of clients and that could create enormous problems for the financial services industry, according to a new report.

The report from KPMG demographics expert Bernard Salt, Beyond the Baby Boomers: the rise of generation Y says that Generation Ys, the age group that covers those aged 16 to about 30, is likely to be a major headache for the financial services industry as it copes with the inevitable decline of the big hump in business caused by the baby boomers moving into retirement.

The report, which is based on surveys and research in London, New York, Tokyo, Frankfurt and Sydney and which looks at gen Ys both as customers and employees of the funds management business, has found that the industry is having difficulty coming to grips with the group some have labelled KIPPERS - kids in parents' pockets eroding retirement savings.

The report says that funds management industry is focused heavily on the baby boomers entering retirement but they have reached their peak. Over the next 15 years, growth in this group will drop and the industry is ignoring the wealth accumulators and inheritors of Gen Y. The industry is confident, it says, but perhaps it's over-confident and kidding itself. The ground is shifting.