It’s an unfortunate development, but there’s no denying that
many Americans are financially illiterate. Students in our high schools are
taught algebra and trigonometry but nothing about the magic of compounding, how
to balance a check book or why it’s important to budget. That people lack these
basic financial skills shows why they need sound financial advice more than
ever, especially when we’re talking about young adults who have graduated from
college with tens of thousands of dollars of debt but haven’t had the
opportunity to learn how to manage money.
One of the big differences I have seen in my work with
millennials that’s different from our average clients who tend to be in their
50s or older, is that they lack a fundamental understanding about what they
need from a financial planning perspective or in many cases that they even need
help at all. Often, when new clients come to a firm like ours they have been in
the workforce for quite a few years, have participated in an employer sponsored
plan and have done some investing on their own. They are at a point where
retirement no longer seems so far off, and they want to make sure they are
prepared. We love to work with clients like that because they really need our
help, but from a practical perspective it’s valuable to initiate client
relationships at a younger age and earlier in the earning cycle.
The earlier an individual can start thinking about financial
planning, saving and investing, the better off they will be in the long run.
The goals they set in their 20s are likely to change over the next few decades,
but that’s okay because a financial plan should be a living and breathing
document that adapts to changes in one’s life and lifestyle. The important
thing is to help young clients lay out their short, intermediate and long-term
goals and then revisit them on a regular basis to update as needed.
But before we can help these young adults on the path to
financial security and success, we must first reach them. As that old adage
says, you have to go fishing where the fish are. The young person not tuned in
to social media is a true outlier these days, so we’ve bolstered our efforts to
utilize this medium to attract younger clients with content relevant to their
needs.
Leveraging social media and our network of connections has
generated leads and new clients. These contacts may not have been looking for
an advisor but seeing appealing, pertinent content gives them a point of entry.
In our posts, we address issues that are important to
millennials and other young adults, such as advice on buying a home or on
changing jobs or careers. Our goal, which should be the same of any advisors
looking to reach this demographic, is to show our expertise in financial
planning, investment management and providing good old-fashioned advice. As
with any successful advisory practice, we have a base of clients who have been
with us for decades, but it’s crucial that we connect with new audiences to
demonstrate that we are not just here to work with older generations of clients
who are preparing for retirement.
It is also important in attempting to cultivate younger
clients that the firm have advisors in that same demographic. We have found
that having younger advisors that work with younger clients who are going
through many of the same things from a financial perspective, is highly
effective. This has helped us to attract more millennials and GenZ because they
recognize that we are professionals, but also that they are receiving
information from somebody who has experienced, or is about to experience, the
same life circumstances. I think that lends some trust, credibility and level
of comfort because they know that we are giving them advice, not just
strategies.
Taking on clients who are early in their careers and haven’t
yet accumulated substantial assets is important to the future of our firm.
While millennials may not be the most lucrative demographic right now, we see
working with these individuals on planning today as an investment in the
future, both theirs and ours.
Over the next couple of decades there will be a tremendous
wealth transfer in this country. Cerulli estimates that some $68 trillion in
wealth will change hands in the U.S. by 2042, with much of it being passed on
to millennials and GenZ.
The millennials we work with are often the adult children of
current clients. In addition to the potential for inherited wealth, a lot of
these second-generation clients are independently successful in their own
right. Working with them early in their careers provides opportunities where we
can help them start planning for the future immediately and build a
relationship that deepens over time.
Advisors looking to cultivate clients in this demographic
need to be willing to put in the time to give them a basic financial education.
Then over time, as the client becomes more knowledgeable, the advisor can
introduce more complex planning strategies and recommend more sophisticated
solutions.
But the biggest challenge in attracting the next generation
of clients is getting over the hump of their preconceived notions of what a
financial advisor is, what we do and who we do it for.
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