Figuring out how to help midcareer executives is fairly easy compared
with figuring out what millennials want from financial services.
Midcareer executives hire an advisor to handle the complexities of their
financial life. They've got sizable assets to manage, steep tuition bills for
their kids and retirement and estate planning needs.
Millennials, by contrast, may have a limited understanding of what
advisors do. They're just starting out in their career, so they have less cash
Moreover, some young professionals harbor suspicions about the financial
industry. Growing up amid the Great Recession left them skeptical of Wall
Street institutions and investment products.
Yet advisors cannot ignore this huge segment of the marketplace. In the
coming decades, millennials will inherit substantial assets from their baby
boomer parents while entering their prime earning years.
For advisors to win over the next generation, citing their credentials
and knowledge isn't enough. They also need to explain their fee structure.
"A lot of millennials have a negative perception of financial
advisors," according to a Deloitte study. "To overcome this negative
attitude, wealth management firms initially need to focus on the pricing
Advisors who court a younger clientele are getting the message. Many of
them include an overview of their fees on their firm's website.
"Millennials seem cost-sensitive, particularly with so many
low-cost platforms available," said Peter Lazaroff, a certified financial
planner in St. Louis. "They are more likely to bring up cost-related
questions like, 'How are you paid?' or 'What's the cost of this fund?'"
Name Your Price: What Millennials Want From Financial Services
When millennials weigh whether to hire an advisor, they want assurance
that they're hiring an educator acting in their best interest. They don't want
a salesperson pitching products.
They may already understand the role of a fiduciary, but many advisors
still define the term. Stating at the outset that the only compensation they
receive comes from the client — not from products they sell — can address
concerns about hidden fees and commissions.
"When we go through the client agreement, our fees are very clearly
laid out," Lazaroff said. "We show fees in both annual and monthly
terms. Millennials are used to a monthly subscription model, so we bill
Prospecting Ideas For Financial Advisors
Because many young adults have wide-ranging financial needs, they tend
to seek advisors who adopt flexible pricing options. Advisors who offer pricing
to fit an individual's situation can attract more early-career clients.
Deb Meyer, a certified financial planner in Saint Charles, Mo., charges
new clients a one-time fee, currently $1,000. That reflects more frequent
meetings during the first year. From there, financial planning clients pay a
monthly amount based on the level of service that she provides. The amount
ranges from $175 to $375.
"I give them the exact number after I meet with them, based on
their net worth and income," she said. "My practice is heavily
focused on young professionals in their 30s and 40s" who welcome different
She knows of other advisors who charge new clients on an hourly basis or
per project. But she rejects that approach. After 10 years as an advisor, Meyer
has learned that summarizing her fees on her firm's website filters out some
"Providing more pricing transparency on my website has improved the
quality of leads I get," she said. "There's this question of whether
potential clients will be deterred by seeing my fees upfront. But it's fine if
that happens because my time is valuable and I'd prefer to serve more engaged
clients who are committed to the process."
Explain And Educate
Young professionals may not necessarily understand how advisors get
paid. That can lead to faulty assumptions about the nature of the relationship.
When millennials who already have an advisor decide to shop around and
switch wealth management firms, they may balk at the notion of paying a monthly
retainer. Even though many advisors are embracing this model, it's still
sometimes perceived as a less traditional way to charge for financial planning.
When Autumn Campbell, an advisor in Tulsa, Okla., presents her fees to
newcomers, a few of them reply, "But my current advisor doesn't charge
In addition to educating them about the various ways in which advisors
earn compensation, Campbell might propose that they bring in their current
statement so that she can compare costs. She finds that many clients aren't
accustomed to paying a monthly fee.
"We use a fee calculator, entering (a prospect's) net worth and
income on a screen to show what they'd pay," Campbell said. "If
there's sticker shock, which we've had just a few times, we thank them and
emphasize that we want them to make informed decisions."
Ending the meeting on a positive note pays off. Campbell recalls a woman
in her mid-30s who didn't want to pay the fee, but changed her mind three
months later and signed on.