Not Your Momma’s Financial Advisor

Not Your Momma’s Financial Advisor

Some financial advisors are “tricking” out their offices and dressing down to attract Gen X and Y investors. But you’ve got to change more than just your look to attract the new generation of clients. The young’uns demand lower fees, no minimums, and a more tech-centered financial experience.

Imagine: You walk into an office, and you’re greeted by a receptionist who offers you a drink—Yoo-Hoo, Tab, Fresca, Hawaiian Punch and the like—which come right out of a mini fridge inside the front desk. As you make your way to the lobby, you’re surrounded by twenty- and thirty-somethings, wearing jeans and reading magazines on their iPads. You sit down at the Oxygen Bar, where, unlike Vegas, you don’t have to pay a cent to breath in one of eight scents of O2. To relieve some stress, you head over to the Wii gaming system on the TV against the wall to get in a quick game of Tiger Woods golf or Super Mario cart. 

No, this is not Google’s Silicon Valley headquarters. This is the office of financial advisors Ted Jenkin and Kile Lewis, co-CEOs and founders of Alpharetta, Ga.-based oXYGen Financial, who launched their firm aimed specifically at Gen X and Y clients about four years ago. The two wanted to create an office environment that was casual, hip and cool, more akin to that of Google than IBM.

“Most of the large financial services firms today, you’ve got CNBC on a TV playing on a wall; you’ve got marble floors and mahogany furniture, and a picture of a bull and a bear,” Jenkin says. “Most of these customers today are doing business with companies like Apple and Starbucks, which has a much more casual, younger feel to them.”

In other words, they don’t want your momma’s financial advisor.

“What I didn’t want is the guy that my parents would’ve gone to, which is the Suit: the power tie, black suit, white shirt, in the bank across the big table, basically making me feel like an idiot all the time,” says Alan Moore, a 25-year-old advisor who recently set up his own practice, Serenity Financial Consulting in Milwaukee, in August.

Not You Dad’s Average Client, Either

Younger clients have different needs, unique tastes, and require a different approach to client service, advisors say. And they stand to inherit $1 trillion a year for the next 40 years, according to sociologist Paul G. Schervish. Some financial advisors are “tricking out” their offices and dressing down to attract these investors. But many say that’s only part of the equation. Because these young people have lower net worths and are in the accumulation phase of their lives, they demand lower fees, no minimums, and a more tech-centered financial experience. 

“Exposing the rafters in your office doesn’t address the two big issues, which are the hidden fees and the biased offerings, meaning 12b(1) kickbacks and the sort,” says Andy Rachleff, president and CEO of Wealthfront, an online financial advice company in Palo Alto, Calif.

Office Space

But it’s a good start, some advisors say. Since launching the firm in September 2008, oXYGen has acquired 1,800 clients with an average age of about 37 and total AUM of $225 million. Lewis says they’ll do over $3 million in revenue in 2012.

Lewis and Jenkin, both 43, are currently developing oXYGen 2.0, a retail store where clients can simply walk in off the street and get financial advice. But it will also be a place where young people can take care of other things—printing, copying, or even shipping. They also wanted to create an environment similar to Starbucks—where people could do work while also having some interaction with others. These days, a lot of people are detached, with many working from home, Lewis says.

“Whether it’s coming in and getting a retro drink out of the old timey Coca-Cola machine, or helping yourself to an espresso or coffee bar, or plugging in and doing the wi-fi and having some business center functionality, who knows where we could take that?” Lewis says.

Randall Gerber, a financial advisor with Raymond James Financial Services in Columbus, Ohio, moved to a new office location in July. The concept behind Gerber’s design was transparency. Built in an early 20th century door and glass factory, the new space is 6,200 square feet and features high ceilings, exposed brick and heavy beams. The firm’s staff sits at open tables in the middle the office, made of heavy wood and natural materials. The few offices that line the walls are exposed by glass.

“I wanted the clients to subconsciously realize that they can see everything everywhere,” says Gerber, 44. “When they walk in the door, they immediately see the entire staff.”

Rather than the typical mahogany conference table, Gerber’s conference table is made from reclaimed flooring from a 100-year-old barn, wormholes and all.

Every day the firm selects a different music station from Pandora.com, an automated music recommendation service, to play throughout the office. For example, they’ll play Kings of Leon one day, Led Zeppelin the next. The only rule: no country. 

Gerber’s average client is about 50, but it’s trending lower. His practice is built on first-generation entrepreneurs, which tend to be younger and think differently, Gerber says. Since the change to the new office, he’s picked up three new entrepreneur clients.

“To me, that’s part of the space, the validation,” he says.

Gerber also instituted a sophisticated version of dressing down. He describes it as not “Zuckerberg casual,” meaning no hoodies or Adidas sandals. Rather, employees are required to wear jeans, sweaters, blazers and loafers—think J. Crew or Banana Republic.

Toby and Tim Meisenheimer, a brother team in Warrenville, Ill., recently got help from their broker/dealer LaSalle St. Securities to build out a new office space from the ground up. Rather than put up walls and separate offices, the two decided to keep the space open.

“We’re watching a lot of the newer firms—the Facebooks and Googles—build more of a collaborative office style setting than individual offices,” says Toby, 38.

The new office opened in September. Every room has large sliding glass doors to make the space feel bigger and use more natural light. It also features a large client meeting room with a sofa and chairs; an open client lounge with a dry bar—sparkling water and water; an open kitchen with an exposed island where people can stand up and have a casual conversation; and a large TV on the wall surrounded by a sofa and chairs for seminar-type events. The office also includes a ping pong table and a kids cube—an open-faced box with an iMac and a TV—where kids can hang out while their parents are in their meeting.

But the redesign was as much about attracting the next generation of advisors as it was about attractive next gen clients, Toby says.

“If we’re going to attract and retain the next generation of advisors, they care more about culture and work/office environment than other generations,” he says. “Part of that is the experience they have by coming to work and enjoying that as a place they don’t want to leave, necessarily.”


But attracting the younger generations goes beyond just changing the look, advisors say. Technology is also key.

Wealthfront’s Rachleff, whose online platform manages money for up-and-coming tech executives of Silicon Valley, says people in their twenties and thirties care more about a company’s web environment than their office. They want everything accessible via the web. They’re also much better informed about products and services that they buy because they’re using the web to get all that data.

Since launching his practice in August, Moore has signed on 10 new clients, two of which found him through his blog or social media. He blogs three times a week, and uses social media to distribute the blog and connect with people.

“I really didn’t expect any return on that for the first 12, 18 months, so the fact that anybody even noted that they read a blog, much less became a client out of it, is pretty huge,” Moore says.

Clients can also schedule meetings with Moore directly on his website, www.serenityfc.com [4].

Lewis and Jenkin are trying to use more mobile technology. Instead of handing out a paper business card, Jenkin distributes his contact info via text instantly when he meets someone. Instead of spamming people’s e-mail inboxes, they also plan on marketing via text.

“Think about how much of your e-mail you don’t look at that just goes to spam,” Lewis says. “But the minute you’re phone goes, ‘Bzzz, bzzz, bzzz,’ and you get a text, you pick it up to see who’s texting you.”

Ross Gerber, president and CEO of LPL Financial-affiliated Gerber Kawasaki in Santa Monica, Calif., advertises through Google and uses Yelp to attract younger clients. When you Google his firm’s name, their Yelp page is the third page to come up, and the firm has a five-star rating.

“I actually have clients sitting in here who are investing $2 to $3 million with us right now that came off of Yelp,” says Gerber, 41.

Younger generations also want to be involved in the financial planning process and have a more interactive experience, says Joe Duran, chief executive of United Capital Financial Partners. Eighteen months ago, United Capital launched a program called Honest Conversations, which includes an online game that helps clients determine what their money biases are.

Neal Slafsky, managing director of United Capital ofFt. Lauderdale, says his office recently put in smart board technology, an interactive whiteboard that allows clients to grab a pen and collaboratively work on their financial plan with their advisor. Younger clients, in particular, have gravitated towards it.

“Clients want to be involved,” Slafsky says. “They want this to be a collaborative partnership and they really want to be able to have real transparency into everything going on with their plan.”

Great Expectations

The advisor’s office environment, dress code, and technology may get younger clients in the door and bring some satisfaction, but because this group doesn’t have a lot of investable assets yet, lower fees and little to no minimums must also be part of the equation, advisors say.

“Even if people are trying to get hip and young and cool, they’re only going to get hip, young and cool for the people that meet their minimums,” says 32-year-old Austin Colby, an RJFS advisor. “You’re not doing anything different.”

The average investable assets of clients at oXYGen are more in the $100,000 to $300,000 range, rather than the $1 million to $5 million range, Jenkin says. The firm has no minimums.

And for advisors to make that model profitable, they’ve got to change their approach.

oXYGen is able to make it profitable by serving a greater number of clients. “This model is definitely more of a volume model than a rate model,” Jenkin says.

“Younger clients don’t have $1 million to invest, which is the entry fee to most fee-only planners,” says Moore.

Moore decided to charge by the hour, with the idea that lower earners and younger clients don’t want to be locked in to a high-cost relationship with a financial planner.

“I think that you just have to recognize that the income is going to come from a different place,” Moore says. “Instead of coming from assets under management, it’s going to come from your hourly rate.”

When Colby’s 63-year-old partner William Franke started to discuss transitioning out of the practice, Colby wanted to capture the next wave of millionaires in the age range of 40-45, rather than in the 70-75 range they were already serving. So he started charging retainer fees ranging from $2,000 to $10,000 a year, a fixed, annual fee based on the managed net worth of the client. Since making the change in 2007, younger clients in their mid-30s now make up 10 percent of their firm’s total business.

They’ve Got Potential

While many of these up-and-coming investors may not have the wealth yet, they have potential, says Michael Silver, founder and senior managing partner of coaching and consulting firm Focus Partners.

“These people are young, and over time, small accounts become big accounts,” Silver says.

For example, when Silver used to be an advisor, he had a client in his late 30s who came in and purchased $5,000 in various municipal bonds. Within two years, he became a $4.5 million client.

“Their greatest asset is their ability to earn money,” Moore says.

Wealthy investors under 55 represent a $31 billion revenue opportunity, according to a recent survey by Cisco Internet Business Solutions Group (IBSG) of over 1,200 investors with assets over $500,000.

In addition, tech IPOs are expected to create $500 billion of market capitalization in the next five years, 15 to 20 percent of which will go to rank-and-file employees, Wealthfront’s Rachleff estimates.

But there’s also an opportunity to capture the assets of younger generations as they inherit wealth from their parents. According to Cisco, 55 percent of the “emerging wealthy”—those with average assets of about $250,000 and are an average age of 49—expect to increase their investable assets by at least 50 percent through a gift or inheritance in the next 10 years.

“You’re either going to bury your head in the sand and pretend that things aren’t changing, or you’re going to be on the front of it, saying, ‘You know what? I’m not speaking to this younger generation, and I might lose my older clients because what I’m doing is not current,’” Duran says.

For more photos of next generation advisors' workplaces, click here [5].