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How to Court the Next Wealth Generation

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Millennials — they’ve transformed everything from how we communicate (see: texting and emojis) to how we shop (see: the death of the mall). With smartphones in their pockets, they have access to information in an instant that previous generations never had at all when they were building their wealth. And with a historic wealth transfer looming — estimates suggest that over the next decade as much as $30 trillion will be transferred from the baby boomer generation — they’re poised to change the financial advisory industry.

Courting millennial clients is essential to the longevity and success of any advisor, but where to get started? Look to the children of current clients. It seems like stating the obvious, but considering that a recent J.D. Power Full Service Investor Satisfaction Study found that “millennials with $100,000 in investable assets currently control the largest portion of at-risk assets managed by traditional financial advisors and half of those investors (48%) say they ‘probably will’ or ‘definitely will’ leave their current firm and advisor,” the importance of courting current client heirs cannot be overstated.

To succeed in establishing longterm relationships and success with this “Next Wealth Generation,” advisors must view these heirs to the wealth throne as brand-new clients and not simply children of former or older clients.

Build Bridges

Don’t assume that your clients’ heirs inherited that same level of trust in you as their parents. In fact, assume the exact opposite. With the Great Recession and Bernie Madoff still visible in the rearview mirror, the Next Wealth Generation has an inherent distrust of the financial establishment.

One of our friends, Senior Portfolio Manager Steven Gattuso of Courier Capital LLC, puts it pretty simply: “Relationship building can begin as simply as email and phone contact. Even if the assets are put into a trust with the advisor, it is still important to get to know the next generation individually to understand their goals and issues.”

As child clients are introduced into financial discussions, advisors need to go through a similar education phase as they did when they first engaged the parent clients. In fact, they may even need more education. A study from PwC found that only 24% of millennials have a basic understanding of financial concepts. Don’t underestimate the importance of providing transparency into how you are compensated. This could be a key factor as to whether the heirs view you as a trustworthy ally. Including heirs in portfolio reviews, eliciting their opinions, and addressing their specific concerns has the potential to help build the foundation for a longterm relationship.

Recognize the Differences

The challenge for advisors goes deeper than just a change in asset ownership. Generation Xers and millennials grew up in a different world than their baby boomer antecedents. As a result, they have different biases, levels of patience, goals and timelines. The 20s for the prototypical baby boomer typically followed a simple blueprint: education, job, marriage, home, family. For the Next Wealth Generation, the trajectory is more protracted and not always in that same order. Advisors need to be prepared to present solutions that work for a variety of household scenarios and spending habits. Investment solutions will need to be flexible, while emphasizing factors that younger investors consider important: transparency, low cost, tax sensitivity and awareness of environmental, social and governance concerns.

Demonstrate Continuity

“I’ve been doing this for 30 years.” You think you’re conveying experience, but millennials care less about the past 30 years and more the next 30 years. And, if you are already in your 50’s or 60’s, how long can they expect you to be involved in decision making? To build confidence that the show will go on, advisors need to demonstrate continuity of their advice:

  • Create depth: For independent advisors, hiring additional staff isn’t always an option. However, services such as an outsourced chief investment officer (OCIO) or an investment consultant provide advisors the ability to show investment depth without losing control of investment decisions or the client relationship.
  • Illustrate your investment process: An advisor whose primary value is as a great stock picker is at the risk of extinction, since any perceived value is gone when that advisor retires, leaves, or loses “the magic.” Demonstrating a disciplined, repeatable investment process that your entire firm practices gives clients confidence that the investment plan will survive the loss of any one individual.
  • Show your support: You are not fooling anyone into thinking you can do it all. Demonstrate that your firm relies on a strong support system of qualified service providers that deal with the small stuff, while you stay focused on your client’s needs.
  • Develop young talent: Many Millennials prefer dealing with advisors closer to their age — peers “understand them better.” Seek out and nurture future financial advisor candidates who can bring depth, diversity and a younger perspective to your practice.

Rethink Your Communication Strategy

One of the most obvious, and tangible, differences in dealing with the Next Wealth Generation is the evolution of technology and its effect on how advisors and clients communicate. Gattuso emphasizes how versatile advisors need to be: “Many boomers still prefer regular in-person meetings with reviews conducted with paper documents, whereas the next generation may have a greater preference for emails as regular communication and are very comfortable with virtual meetings through technology platforms such as Skype (especially if they are out of town) and electronic access to reports rather than paper.”

Millennials are used to having instant access to information and more frequent, informal communication, and that extends to addressing their finances. The most obvious example of this evolution is the smartphone. According to a study from Deloitte, 89% of millennials check their smartphone within 15 minutes of waking. Checking social media is the first action of 37% of those individuals. Revisit how your customers, both current and future, engage with your business. How do they prefer to connect? Is your website mobilefriendly? How accessible is the information? And how quickly are you able to respond?

In order to succeed with the Next Wealth Generation, advisers must adapt and evolve their practice to suit the unique needs and appetites of millennials. Those who do will cement themselves as essential a part of their clients’ lives as a smartphone. Those who don’t will go the way of the landline.


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