Next Gen Investor
Five Strategies for Retaining Next-Generation Clients

Five Strategies for Retaining Next-Generation Clients

Improving engagement levels

It’s never been more important than now to develop a connection with the younger family members of your clients. We’re in the midst of the greatest transition of wealth in history.  By 2050, over $27 trillion is expected to pass from one generation to the next, and with that transition a significant percentage of the next generation will leave their parents’ and grandparents’ advisors.  According to the 2012 study, Next Generation Wealth: The new face of affluence, 62 of ultra-affluent next-geners surveyed said they would likely change advisors, and many industry watchers put that number much higher.

All isn’t lost.  A follow-up 2014 study of 87 ultra-high-net-worth individuals between the ages of 18 and 40, Next Generation Wealth: Defining a New Direction, found 69 percent of those surveyed said they’re likely or extremely likely to continue using their parents’ and grandparents’ advisors.  So what accounts for this seeming change of heart?  The key difference between the 2012 and 2014 study participants is their engagement levels with advisors.  The participants in the 2014 study were particularly engaged: 43 percent said they have a very active relationship with their advisors.  More than half of the 31 percent in the 2014 study who don’t plan to stay with existing advisors also didn’t have relationships with them.

Getting Started

Engagement leads to stronger relationships.  Education coupled with strong communication results in a more empowered and engaged Next Gen.  Conceptually it’s simple.  In practice, it’s not.  So how do you get started?

  1. Old-fashioned trumps high-tech: Millennials, Gen Y, Gen X—the next generation—are often described as tech savvy, data-driven and social media-obsessed.  But when it comes to engaging with advisors, they prefer face-to-face meetings.    Eighty two percent of those in the 2014 study said they prefer in-person engagement, followed by phone, 72 percent, and email, 68 percent.  Communication through social media and Internet/video/skype weren’t particularly sought out, with a mere 15 percent, and 5 percent, respectively, seeking such interactions.
  2. Start early: Building relationships takes time.  More than half, 54 percent, of the 2014 study respondents began working with an advisor when they were under 20 years old, and 38 percent did so in their 20s.  Initial discussions often center around who the advisor is and what she does for the family.  Over time, advisors become more sophisticated in maintaining the level of disclosure with which the matriarchs and patriarchs are comfortable.  Much can be shared without putting specific dollar amounts on expected family wealth or inheritance.
  3. Forge bonds with educational programs:  It’s crucial to identifya manner to reach out to the Next Gen, whereby the older generations are comfortable and the Next Gen are interested.   General education fits that bill.  Gatherings including members of different families are particularly attractive. Approximately 75 percent of the 2014 study participants said they would be interested in attending a Next Gen program hosted by an advisor.  If you don’t have the resources to craft your own Next Gen gathering, taking clients to an existing program held by a university or membership organization is a strong option. Next Gen members need the most support with investments.
  4. Appeal to sense of social consciousness:  A hallmark of the Next Gen is they tend to be socially conscious.  Discussions around mission-related investing, philanthropy and making an impact are ideal to generate interest and engagement. All of the subjects can be used to teach about wealth management and as a stepping stone to getting them more involved in learning about managing their wealth.
  5. Understand family values:  The majority of the Next Gen have similar values as their parents.  A key to engagement is to find out what’s important to them—how they view wealth and its purpose.

Education is Key

There’s a direct correlation between how educated, and by association, how empowered, a Next Gen family member is  and her comfort and happiness with family advisors and wealth plans.  By establishing relationships with the Next Gen and helping them learn about their wealth, financial services providers will significantly increase their ability to retain their roles as trusted advisors.

What have you done to better connect with Next Gen clients?

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