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Broadly speaking, advisors already count plenty of parents among their clients. For the purposes of this article, we’ll focus on the value of nurturing relationships with clients that have younger children and offspring that are far away from inheritance age.
This doesn’t imply glossing over baby boomers and older clients is the road to take – it most certainly isn’t. However, there’s value in making it a point to work with clients that have younger kids. Consider the following hypothetical scenario. An advisor has a married Gen X couple on the client roster. They’re in the late 40s or early 50, meaning it’s possible their kids are Gen Z.
Ending the scenario there, it still amounts to a positive for the advisor because he or she is catering to a underserved demographic (Gen X) while laying the foundation for a relationship with a coveted demographic (Gen Z).
The scenario doesn’t have to end there nor should it. Astute advisors know that parents want to provide their children with financial assistance and that means much more than just a hefty inheritance. In what follows, we’ll highlight how advisors can add significant value for clients that are parents.
Education Matters
One of the benefits of being an advisor is that the work often deals with certainties and realities. Speaking of such things, the realities are many clients with kids want their progeny to be more financially successful than they are. They also want the children to be financially educated so as to avoid mistakes, such as credit missteps and the like.
Unfortunately, another reality is that, broadly speaking, the American K-12 education system has never emphasized financial literacy. That topic – a vital one at that – falls to parents, but not all parents are equipped to adequately address the subject. Enter advisors.
“Before diving into investing, it can be helpful to make sure your clients’ younger children understand the basics of money management, including budgeting, saving, and spending,” suggests Nationwide’s Kristi Rodriguez. “You can encourage clients to start with simple, age-appropriate money lessons, and gradually build upon them as they go. For example, a client could give their child a cash allowance and help them choose categories they want their savings to go into using a piggy bank, jars or envelopes. By showing them how money can be allocated to different wants or ‘needs’ they can learn the importance of money management.”
From there, advisors can address specific needs and goals among generations. This is something advisors are already proficient because they’ve long engaged in such exercises with boomer clients.
“The importance of these goals is relatively consistent across different generations too, except among Generation Z (defined generally as adults between the age 18-25). For younger families, saving for retirement and paying off debt isn’t as high of a financial priority as buying a home and building credit,” adds Rodriguez. “Knowing this, having conversations about retirement and education savings can and should begin early, to save clients’ children future stress and help them plan for their goals of homeownership or building credit.”
Easy Steps to Take
Advisors don’t have to stretch to better serve clients with kids. Some of the initial steps on this journey are basic and include opening custodial accounts.
Another avenue for advisors to consider is to tell clients to bring their children along for advisor meetings. That’s a soft skill and one that increases the chances the children, when they’re adults, will stick with that advisor.
“Introducing investing to your client’s children can have several advantages; they’ll have a longer time horizon to invest, meaning that they can choose to take more risks and potentially earn higher returns. Investing early can also help children develop good financial habits, such as saving and budgeting. Additionally, investing can teach children valuable skills, such as critical thinking, goal setting and decision-making,” concludes Rodriguez.