From the March 2017 issue of Investment Advisor • Subscribe!

Thinking Millennial: How to Woo the Largest Generation

The first in a series on understanding the generations and what they want and need from you

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Millennials are the largest generation in American history. How will you gain their business? Millennials are the largest generation in American history. How will you gain their business?

Feel the ground trembling underfoot? It's the largest generation in American history thundering into the economy: more than 92 million millennials, now about 19 to 35 years old.

After swaying their parents’ decisions for years, they’ll control $11 trillion of their own by 2030, according to generational expert Cam Marston, who surveys the landscape for his firm Generational Insights. With an estimated $344 billion in inheritances landing in their laps by 2040, they’re going to become the primary consumers of financial advisory and investment services. Advisors who understand this generation and what they need will be able to cultivate the loyalty of clients who will be saving, investing and planning for decades to come.

But you know that. You’ve already put up a website, dipped a toe in the water with LinkedIn and possibly Facebook, and begun to cultivate relationships with your clients’ children. Still, millennials may seem a foreign species if you’re used to clients nearer your own age.

You’re not alone. “We all live in the past, some further back than others,” wrote IA columnist and veteran consultant to the advisory industry Angie Herbers in a January article. “[M]ost baby boomer advisory firm owners […] still think the world largely works the way it did 20 or even 30 years ago.”

While helping create client service programs for a number of advisory firms, Herbers has found that many financial professionals get it wrong when working with millennials. “They often believe an app, a website and automation is the backbone of the ‘new’ generation of wealth,” she said. “We just have not found this to be true.”

With the usual caveat about applying broad generalizations to unique individuals, here's what several industry authorities have learned about this generation and how to earn its members’ respect.

Financially Confident (They Say)

As teens and young adults, millennials basked in economic growth and optimism until the Great Recession yanked the rug out from under everything. Still, many of them say they’re confident about their financial well-being — more confident, in fact, than most of their elders are.

Tyler Nunnally, U.S. strategist for risk tolerance profiling firm FinaMetrica, told us that 43% of its millennial clients report “a great deal of confidence” or “complete confidence” in making good financial decisions. By contrast, only 30% of older clients feel the same degree of certainty. “Time will tell whether this represents a false sense of security,” Nunnally said.

Herbers is skeptical. “I believe they are outwardly self-confident, through social media, with friends and online,” she said. “But when you get them in a room without the pressure of their peers, they are often not confident about their finances. The social pressure to ‘be someone’ is very high among this generation.”

What They Need To Hear

“One of the biggest challenges facing millennials,” points out Kol Birke of Commonwealth Financial Network, “is that through advertising and social media, they see the best of what the world has to offer with the idea that it's normal to get it all, rather than the hard truth that we often need to make tough priority decisions and live without a lot of what we’re led to believe will make us happy.”

“Our country is woefully financially illiterate,” agreed Deena Katz, co-chairman of Evensky & Katz/Foldes Financial. “It hasn't helped this generation that their parents didn't teach them much about money and often tried to hide their own financial difficulties.”

Many millennials need to learn that “waiting on a windfall like a stock option event or an inheritance is not planning,” Herbers said. “Financial wealth is the accumulation of years of discipline and saving.”

She added, “This is a generation that has grown up with an online library — the World Wide Web — at their disposal, where they can ‘self-teach’ themselves anything, or so they believe. The social pressure to be DIYers is very strong among millennials. While this self-education is good in many ways, it can be bad because it makes many of them think they can be their own advisor.”

Marston, too, has noticed “a wide gap between what they think they know and what they do know. Millennials have big goals but no plans. They think anything is attainable.”

What they need, he said, is coaching from a “therapeutic educator” (to use Olivia's term) who can help build a bridge between their professed confidence and their level of actual knowledge. In the meantime, he advised, don't tell millennials that something can't be done. Instead, explain how it could be done and help them assess the necessary tradeoffs.

‘We Are the World’

Millennials bring social consciousness to almost everything they do.

As a generation, Marston has observed, they’re idealistic, environmentally aware and optimistic about the power of the government and their own activism to change things for the better. Millennials are willing to put their money where their morality is, shunning companies that seem greedy or callous and favoring those that support their values.

In a very literal way, millennials are eager to change the world. They’re more likely than boomers to be concerned about both domestic and international issues, according to a 2016 donor survey for Fidelity Charitable. Some 42% also said they had tried such forms of philanthropy as buying from a company with a social mission, compared to just 14% of older Americans.

Earning a paycheck doesn't erase the impulse to do good. “Young people entering the workforce often ask what the company volunteerism policies are,” said Katz, who has a front-row seat on millennials through her teaching post at Texas Tech University. “If there isn't one, they offer to help get one in place.”

This generation may occasionally need encouragement to focus more on their own needs. “It's important for them to know that they don't always have to be devoting their money to save other people, things or animals,” Herbers said. “While millennials are extremely generous and charitable, at times they can afford to be a little more selfish.”

Where Do They Find Guidance?

Even while pursuing a DIY path, many millennials yearn for financial guidance. However, Katz commented, “they have a huge issue with trust, especially [after] seeing their parents and grandparents suffering from consequences of the Great Recession.” Reluctant to consult a bank, broker or independent advisor, they often seek help from a spouse or partner, parents or friends.

Not robo-advisors? Not usually, according to Katz. “While they may use robo-advice to get started, they are not particularly enamored of it on an ongoing basis. Most want a more personal connection.”

“In my experience, this generation is just as interested as any other generation in human advice,” Birke said. “They are fairly comfortable Googling for answers, including serious issues like medical or financial, but as with any generation there is a lot of avoidance if they see that something may be wrong or a struggle.”

It comes back to a need for better financial education. As Katz said, “These people want information, want guidance and want to work together with an advisor.”

When they do take their questions to a professional, millennials want to play a role in figuring out the answers. Many want to understand the thinking that goes into a recommendation, not just the final result.

Birke's view is borne out by information gathered by Julie Littlechild, founder of AbsoluteEngagement.com, who helps professionals and entrepreneurs design businesses to support the lives they want to live. In a survey of 1,000 investors, Littlechild found that two-thirds of those under age 40 said they were actively involved in developing the agenda for meetings with their advisor, compared with less than half of investors in their 40s and just over one-fourth of those who were 50 or older.

Littlechild also discovered that even though these younger clients tend to be somewhat more critical of their advisory relationship, they were more likely to make referrals. A surprising 67% said they’d referred others to their advisor in the past 12 months.

“We do know millennials are very brand-loyal and crave human connection,” Herbers summed up. “I believe the future will be a hybrid of both human interaction and virtual interaction to make up an ‘experience’ for the millennials to share with their peers.”

10 Ways to Engage Their Interest

To understand millennials and reach them where they actually live, our sources suggest advisors take these steps:

  1. Understand that they’re on the move. “Messages in motion are the ones that work with my clients,” Herbers said. “Themes such as ‘On your way to …,’ ‘Moving toward …,’ etc. [The trend of] millennials renting homes tells us they want to keep going, stay in motion. Settling down with peace of mind is not a message that resonates.”

  2. Find out what turns them on. “Maybe it's dogs,” Herbers suggested. “Maybe it's babies in Africa. Maybe it's organic food. Don't judge, and continue to ask questions about it.”

    Does that mean niche marketing? “If you niche it,” Herbers said, “niche on a ‘purpose,’ like animal rights or cancer research, or a ‘path,’ like getting to $1 million in savings or making the most of your life experiences, rather than a profession like doctors or lawyers. My favorite line with millennial friends is ‘What social purpose are you most passionate about?’”

  3. Link with what they believe in. If your services are linked with qualities, ideas and images that generate positive feelings, you may gain valuable “social currency” that encourages millennials to advocate for your business within their social networks. In his book, “The Gen-Savvy Advisor,” Marston suggests that these qualities could include “green” practices (you use only recycled paper; your office building is LEED-certified), efficient technology, sleek design, quirky individuality, simplicity and affordability.

  4. Don't try to be what you’re not. “Much of this generation just wants raw honesty,” Birke said. “Growing up bombarded with advertising, they’re not looking for anything that smells like a salesperson, but instead are seeking a professional with information, wisdom and empathy. It's also a generation that is flooded with messaging. So rather than sending a default newsletter that's the same for everyone, it's ideal to get a sense of an individual's needs and customize your messaging.”

  5. Position yourself as an unbiased guide to financial well-being. Think outside the investing box. Littlechild's research showed that younger clients wanted to hear more from their advisor on second careers, volunteer opportunities, business succession planning, communicating about money with kids or with a spouse or partner, helping children make better money decisions, caring for aging parents, charitable giving, creating a meaningful legacy and crafting a vision for a meaningful retirement.

  6. Educate non-millennial clients about what you can do for millennials. “I teach the advisory firms I work with to give short pitches to their non-millennial clients,” Herbers said. “That way, when one of these clients is asked for help by their millennial children or friends, they can respond in a way that resonates. For example: ‘My financial advisor helped me save for my retirement and create an estate plan. He also helps clients, like yourself, save for causes and purposes you value most while providing for your family and building life experiences.’”

  7. Build awareness with a social media strategy. “I have not seen social media work as well as non-millennial client education” in a good strategic marketing plan, Herbers cautioned. Nonetheless, a presence in major social media is virtually a must. “To Generation Xers and millennials, social media today is the Yellow Pages of 30 years ago; you must be present to be ‘in the game,’” according to Marston. In Littlechild's survey, many under-40 clients said they follow or connect with their advisor on Facebook (53%), LinkedIn (40%) or Twitter (38%).

  8. Make sure your online messaging and images are engaging. Many millennials “will believe a Google search more than [the assurances of] a plumber who's been fixing pipes for over 20 years,” Marston told us. “It doesn't always make sense; but this generation has been burned, so advisors can have an uphill battle proving themselves.”

    Making a good first impression online is critical. “Millennials won't buy from people they dislike,” he pointed out. “You need to look like someone they want to engage with. Your LinkedIn profile has to explain not just your past accomplishments but how you serve clients today and anticipate serving them in the future.” (See more from Marston in “Optimizing Your (Online) First Impression” on ThinkAdvisor.com.)

  9. Think long term. “The biggest mistake advisors make with millennials is making assumptions about what they want and whether they’ll make a good client,” Birke said. “Just as most baby boomers aren't ideal clients due to lack of savings, investment discipline or any number of other reasons, there are going to be millennials that aren't a fit. But many millennials are looking for high-quality advice and are willing to pay for it, even if they don't currently have the assets to be a great client.”

  10. Technology is not the be-all and end-all. “Many advisory firms believe they need to invest in fancy technology — robos, online programs, apps, etc. — to attract millennials,” Herbers said. “However, the best and most effective client service programs to get millennial clients are ones ‘packaged with a purpose.’” For example? “‘Financial Planning for Animal Lovers: We help you manage your finances so you can contribute more to the animal shelter.’”

How You Should Behave Toward Them

“Humility is probably the number one quality to display to millennials,” Birke counseled. “While you want to be confident in your advice, don't be shy to share the mistakes you’ve made around money, the struggles you have in communicating with a spouse about finances or even limits to your knowledge. They tend to value authenticity.”

To Herbers, the most important message for millennials is that you’re prepared to help them get where they want to go. “Millennials operate in motion and on demand,” she said. “This means they believe in mobility and response time. Millennials want systems to track their progress toward their goals, mobile balances, deposits and transfers to save them time.”

All our interviewees agreed on the need for better financial education. “Millennials want the information and guidance to make better financial decisions,” Katz said. “When Texas Tech started the Financial Planning Academy in 2015, we had 35 kids without any advertising. This year we expect over 80, with many students returning.”

Maybe you can't start an academy, but you can help the next generation of financial consumers reach the goals they desire without a huge expenditure in staffing or systems.

Talk to them with sensitivity to the social assumptions they’re testing and the issues they believe in. As Herbers urged, “Convince them that money is not an area of their life where they want to be advising themselves.” Despite their deep connection with technology, you’re likely to find that many of these extraordinary millennials are ready for a one-on-one relationship with you.

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