From the August 2010 issue of Investment Advisor • Subscribe!

Retirement Planning: Serving Gen Y Now

Advice on branding, service, and capturing Gen Y--and its assets--now

Advisors have always viewed the transfer of wealth--in particular high-net-worth wealth--as a legacy issue, focusing on those older clients who will be the donors of that wealth. Liz Nickles, senior VP and chief marketing officer at New York-based FTI Consulting, says that model has changed, and that 80% of high-net-worth wealth is actually entrepreneurial rather than inherited these days, which means that advisors need to change their approach toward Generation Y, the beneficiaries and often the creators of this wealth.

Moreover, Gen Y's view on wealth is different from that of their parents and grandparents: "Their value proposition has shifted from the single bottom line of profit to the new bottom line of 'planet, people, and profit,'" Nickles says. "Advisors who want to work with this segment of the population need to understand that."

Nickles believes that the anticipated generational wealth transfer to Generation Y--which she defines as anyone born between 1976 and 2000--is upwards of $30 trillion, and will create one of the greatest market opportunities ever for individual advisors and their institutional partners (and competitors). Gen Y clients are also actively seeking financial advice, she says, yet advisors and institutions have not really caught on to this and the space remains grossly underserved. "Unless they get in front of this group now, they will lose them, putting the critical mass of wealth transfer assets at risk," Nickles says.

Granted, less than 5% of investment advisors are under the age of 30 (and therefore on the same wavelength as Gen Y in terms of understanding how they think and what they want), and both advisors and institutions have been focusing mainly on the Baby Boomer market. But according to Nickles, who has done extensive study on Gen Y and is the author of 11 books, including "The Change Agents," about the socioeconomic impact of that age cohort, advisors just cannot afford to ignore this generation, and most advisors will be able to relate to this group if they understand a few basic facts about them in order to tailor their approach.

Planet, People, and Profit

First and foremost, advisors must understand the importance of the Three Ps--planet, people, and profit, Nickles says. She says that most members of Gen Y won't take jobs simply because they want to make money, for example, and they would readily shun companies that are not socially or environmentally responsible for their actions, she says. The same applies for the investments a Gen Y person would want to make with her money, so "any advisory or investment program must take into account that the motivation is not money alone and must be constructed around the idea of social responsibility."

For many advisors, this is a difficult concept to understand, but it is vital, Nickles says, and is just as important as the role of technology in Gen Y members' lives. Gen Y was born sitting at the computer, Nickles points out, and so anything that isn't deliverable on an iPod or now iPad won't really fly.

"There's been a digital as well as a mindset gap," between Gen Y and most investment advisors and institutions, Nickles says. "Many young people go to the Web for their answers or interaction and financial firms have faced security issues and lack of relevant targeted tools when dealing with clients--particularly younger clients--over the Web."

Get 'Em While They're Young

Finally, and perhaps most importantly, advisors and institutions must pay attention to the idea of branding. "This is a quick-shifting generation and if you haven't connected with them on a brand level by the time they are 30, they will leave your brand," Nickles says.

"Advisors tend to go with the parents, grandparents, or family holistically rather than focusing on the members of the rising generation.... but even if it's their parents' brand or advisor, [Gen Y members] will get out of the relationship if a connection hasn't been made; so advisory revenues are at risk."


Savita Iyer-Ahrestani is a freelance business journalist currently based in New Jersey. She can be reached at siyerwriter@yahoo.com.

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