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7 Keys to Attracting Gen Xers and Millennials to Your Practice

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What You Need to Know

  • By 2030, Generations X & Y households will control 47% of wealth in U.S., vs. 45% of baby boomers.
  • Firms in the top quartile of revenue growth have more younger investors among their clients.
  • This group prefers a financial coach to a financial planner.

Baby boomers have been financial advisors’ core client base for years, but a practice needs new blood to continue to grow. Considering that Gen Xers and millennials will control 47% of wealth in the United States by 2030, advisors need to understand how to attract this younger group and adapt their firms accordingly.

And the younger generations’ wealth will only increase as they inherit a “significant share of the $24 trillion expected to be passed down in the next decade,” according to  a new study by T. Rowe Price that explores attitudes of the next generation toward financial planning — and planners. “In fact, the next generation will surpass baby boomer inheritances in just three years.”

Also, firms with the highest revenue growth had the largest percentage of clients under 55 (the oldest Gen Xers turn 56 this year). The study found that 37% of clients at firms in the top quartile of revenue growth fell into this age range. Only 12% of clients at bottom-quartile firms were 55 or younger.

The quantitative and qualitative study looked at the top 10% of earners between ages 25 to 49, over-sampling diverse demographics, with $100,000 to $1 million in investable assets, compared with those over 50 with more than $1 million in investable assets. The study looks at subsets of these groups as well.

The Pew Research Center defines Generation X as Americans born from 1965 to 1980 and millennials as those born from 1981 to 1996.

‘An Old White Guy on a Golf Course’

Gen Xers and millennials have a certain views of advisors, the study found, stating they are usually “an old white guy on a golf course” or “they’re geared toward people who have a magic amount of money.”

Here are seven findings about the younger generations and what steps advisors can take to earn their business.

1. Next-wave investors don’t believe they are doing that well — or that advisors want their business.

They don’t see themselves as “wealthy,” and therefore don’t believe an advisor is interested in them, the study found. Further, they don’t relate to “an overabundance” of messages about retirement.

The younger set of these investors, those born after 1980, have what T. Rowe Price calls a “scarcity mindset.” They have seen two major recessions, a war and now a global pandemic without the ”prosperity” of the 1980s and 1990s in adulthood.

This has had a big impact on their investing, the study notes: They save more, they are more conservative and risk-averse than older investors and feel negatively about their current situation. Most don’t feel they are rich enough to afford an advisor.

Advisor actions: Start a relationship by helping them build confidence with their finances.

  •  Ask open-ended questions that allow you to coach them to prepare for market ups and downs.
  • Offer education events, like financial planning boot camps.
  • Look for ways to interact with the next generation, especially using current clients and their heirs and grandchildren.

2. Next-wave clients need someone to help get their finances in order.

Retirement isn’t a priority right now for this group, which believes their “financial house is on fire,” the study states. That said, only 10% listed debt as a top pain point.

Advisor actions: Like with any new client meeting, ask them for their pain points, and once those are addressed, longer-term goals can be discussed.

3. Next-wave clients want a financial coach.

Sixty percent of Gen Xers and millennials who participated said they want a “financial coach” who motivates and helps them move toward their goals. This compares with 22% of traditional (i.e. older) clients who “put a much greater value on investment expertise,” the study found.

Advisor actions:

  • “Reframe” yourself to be aspirational and approachable.
  • Help clients achieve short-term goals, in addition to offering retirement advice.

4. Don’t use financial jargon.

The study found that traditional jargon doesn’t resonate with younger investors. Benefits-oriented language worked better than expository terms.

For example, “financial health” and “prepare for your future” go over better than “holistic” and “risk management” or “portfolio management,” the study found. “Financial coach” is much better than “wealth manager.”

Advisor actions:

  • Do an audit of your communications — written and verbal — to make sure you avoid terms such as boutique, fiduciary, asset allocation, diversification, net worth and time horizon. Instead focus on: long-term approach, protect your finances, customized, financial planning and goals-based.
  • Develop an elevator pitch for this age group that establishes you as a partner or coach.

5. Reevaluate how you charge for advice.

There has already been a shift on how advisors get paid, moving from commissions to fees. The study found that although 55% of traditional clients prefer asset-based fees, 36% of the next wave prefer flat fees for monthly service or an annual subscription, while 33% prefer asset-based fees.

Advisor actions:

  • Review your fee structure and offer different options and price points.
  • See how members of your team, particularly junior advisors, could help with bringing on next-wave clients. This might even help with lowering fees for these new clients.

6. Make sure your firm is first in internet ranking searches.

With the next wave of investors comes a new way of finding resources, and that means the internet. The study found that though 81% of traditional clients get referrals from a trusted source, that drops to 62% of next-wavers. The other ways they search are online sites and online reviews (39% for both).

Advisor actions:

  • Check where your firm appears in an internet search, using terms like “financial planners near me.”
  • Set up and stay on top of a social media routine: Post commentaries, insights and comments to social media sites weekly.

7. Practice diversity in your handling of clients and in hiring.

The next-wavers are much more diverse than traditional clients. The study found that women, African Americans, Latinos, Asians, and LGBTQ+ investors all have different attitudes about behaviors and goals.

For example, half of African Americans surveyed said saving for an emergency fund was a top priority, 44% of Latinos expect to work into retirement (versus 27% of other next-wave investors) and 43% of LGBTQ investors rank security highest, and thus have the lowest risk tolerance. Women are second to Asians in not using a financial planner. Know who you are speaking to when meeting with new clients.

Advisor actions:

  • What can you do to become an expert in any subgroup? Look at companies that might have specific resource groups. Seek out those clients.
  • Embrace best practices as you hire new team members, ensuring that 25% of candidates interviewed are diverse.
  • Expand recruiting efforts.
  • Collaborate with younger planners.