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.
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.