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It’s only slight hyperbole to say advisors are likely up to their eyeballs in resources and tips for improving relationships with clients in the Gen Y (millennial) and Gen Z demographics.
Focus on those age groups has been foisted upon advisors by both financial services companies and the mainstream financial press all while ignoring the fact Gen X wants financial advice and will be on the receiving end of the great wealth transfer prior to their younger counterparts. That’s just how the math works.
Still, with millennials and Gen Z being framed as coveted demographics – they are – advisors may be in need of guidance in terms of better connecting with these groups. Data confirm there is good reason to embrace related tips and education because owing to some “fudging” of the age ranges that constitute millennial and Gen Z, by some estimates, this pair of demographics account for 47% of the U.S. population. Likewise, just about 1.5 of every 10 of them are currently working with an advisor.
It can be inferred from those data points that millennials and Gen Z’ers are potentially attractive growth avenues for advisors, but establishing those relationships requires a solid blueprint.
Blueprint Tips
A recent Fidelity white paper details some valuable tips for advisors looking to bolster business with millenials and Gen Z. The first item on the list encourages advisors to establish a target client portfolio, meaning it’s wise to look beyond on a prospective client’s current salary and assets.
“Surprisingly, clients with higher assets or incomes may not be the most valuable to your business over time (see example). That’s why we think it’s important to consider Customer Lifetime Value (CLV) when choosing with whom to work. You can and should be deliberate about the attributes you seek in younger clients (e.g., profession, savings rate, attitude), so that you can attain revenue and profitability goals. Establishing appropriate pricing and operating models is critical too,” notes Fidelity.
A second idea and an easy one to implement at that is leveraging relationships with current clients. Translation: Advisors likely already have plenty of younger baby boomers and older Gen X’ers on their client rosters. Those demographics are the parents of milennials and Gen Z. In the case of younger Gen X’ers, some of their kids may be in the Gen Z group, too.
Another not at all surprising concept is social media. For better or worse, Generations Y and Z view this is as a viable avenue for financial advice. Advisors would do well to embrace, not fight, that trend.
“Winning the next generation requires engagement via social media, creating and maintaining a presence that allows you to target and scale your marketing efforts,” adds Fidelity.
This is area is of particular importance to advisors and younger prospective clients because thanks to platforms such as Instagram, Tik Tok and Twitter, separating credible from dubious financial advice is getting harder by the day for social media generations.
How to Cater Directly to Younger Clients
It goes without saying that all clients, regardless of age, want to feel valued. Some more than others also want to feel “special.” Broadly speaking, that is applicable to millennials and Gen Z.
Again, this is a concept to be embraced, not fought, and it can be accomplished by developing branded services geared specifically toward these crucial demographics. Courtesy Fidelity on that tip. The fund manager also notes advisors need to offer these demographics investment solutions that align with their values. Those can include climate-aware strategies and environmental, social and governance (ESG) funds, among other tools.
“It’s also important to assess your firm’s operating assumptions, making sure you can serve and support younger investors efficiently. You may want to offer an alternative fee structure (e.g., hourly fees or flat fees) to ensure a certain revenue level or add digitized solutions to reduce service costs. Creating (or tapping into) online educational content is one way to enable clients to learn, while doing it in a scalable way,” concludes Fidelity.