According to a BMO survey, gen Z and millennials are the most engaged generations when it comes to tracking financial goals. But they don’t necessarily want to be do-it-yourself investors. From the same survey, 44% of gen Z and 51% of millennials relied on professional advice for their financial decisions. A Natixis Investment Managers’ global study echoed similar findings, with 40% of millennials reporting they looked to advisors for help with financial decision-making, while only 7% relied on automated advice like robo-advisors and algorithms.
Another surprising discovery is that younger generations are more likely than boomers to want to work with advisors. A study by Dow Jones and AdvisorStream reported that up to 83% of younger generations, versus 63% of boomers, see value in planning for their goals with the help of a financial advisor. The study theorized that, as the younger generations accumulate wealth, they find managing their own wealth to be daunting and complicated, so are more inclined to work with a trusted advisor.
As well, millennials and next gen have myriad choices for how to manage their money and may need help assessing their options. There is also the Covid pandemic effect. Some people sought professional advice for the first time during the pandemic and are now more open to working with a financial advisor for planning and investment guidance.
However, to attract younger investors as clients, you need to approach them differently than you do their parents. Most importantly, they want you to see the world from their perspective, to truly understand their goals and why they are investing. They want a hybrid advisory relationship that combines an advisor and access to digital tools. Finally, instead of the standard AUM fee structure, they expect a variety of fee options to choose from, so consider offering different fee options.
How advisors can meet those expectations
Cultivate referrals and include family in meetings
The number one reason that younger investors choose to use advisors is because of a recommendation or referral, according to the Dow Jones and AdvisorStream study. To retain inheritance assets, it’s important to get referrals from family members. Encourage boomer clients to bring their millennial children to meetings, and include the entire family in financial planning conversations. Without an existing connection or referral, millennial children are much more likely to leave their parents’ advisors when the time comes.
Provide financial literacy support
Help educate younger clients about personal financial management, budgeting, investing and investment options. Curate and send them articles or podcasts that are relevant, given their stage of life and goals.
Leverage digital tools
According to an EY report, 42% of millennials preferred a hybrid advisory relationship, where clients have a personal connection with you as an advisor but are well supported by robust digital tools. Look to increase your digital capabilities so you can provide a balance of personal advice and planning supported by the digital tools and account access they expect.
Help them identify tangible goals
Learn what is important to millennial and next gen clients. Support them in identifying and articulating their goals, and develop an actionable financial roadmap to help them achieve those goals.
Turn CFR requirements into an opportunity
Some advisors view client-focused reforms as requiring them to spend more time on compliance-related activities. Instead, turn the expanded KYC and suitability requirements into opportunities to learn more about individual clients and demonstrate your value. Show that you put the client’s interest first, and explain the rationale for your investment recommendations. Finally, be sure to be transparent about the fees that clients pay. Transparency is particularly important to this target client group, as they are accustomed to getting it elsewhere.
Susan Silma is head, regulatory business practices, with Sun Life Financial Investment Services. She is a lawyer and former regulator, and is passionate about integrating compliant practices into a positive advisor-client relationship.