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Strategies for Reaching Millennial Investors

Advisors can use a variety of techniques to attract and retain emerging investors.

According to the U.S. Department of Labor, millennials will make up half of the American workforce by 20201. With this statistic in mind, it is increasingly important for advisors to think strategically about how to engage the next generation of clients so that they can continue to drive firm growth in years to come. However, despite the growing importance of this emerging demographic, we see that younger investors are often skeptical of financial advisors and that they value different advisor-client relationships than their parents and grandparents. As a result, advisors who want to ensure the continued success of their firms in the years ahead will need to adapt their service models and communication techniques to attract a younger demographic of investors.

Recent research consistently shows widespread cynicism among younger investors about financial advice and the value it provides. In fact, data indicates that younger investors are far more likely to fire their advisor than baby boomers. We even see that most investors actually fire their parents’ advisors in the wealth-transfer process of inheritance2. Much of this mentality is driven by an inherit doubt about the value of financial advice relative to its costs. Another issue is that younger investors typically have a relatively small net worth, making it challenging for them to engage with an advisor at a cost that makes financial sense.

One key way for advisors to attract younger investors is to establish offerings that are better suited to the demographic. For instance, advisors can begin by offering a consulting service where they provide general financial advice at an hourly rate. While this won’t allow an advisor to control the entirety of an investor’s financial assets, it’s an effective way to begin a relationship with a younger client. As the investor ages and presumably grows their net worth, this relationship can expand and become quite lucrative for the advisor.

Another option is to offer a study group that is focused on cultivating young prospects by providing seminars on relevant financial topics, such as repaying student loans or deciding whether to buy or lease a car. Advisors can charge reasonable rates for these seminars, using them as a tool to begin engaging with younger investors. Finally, many advisors find success by developing a small account offering focused on attracting millennials. This involves a traditional AUM fee arrangement, but with a lower AUM minimum and less complex planning needs. Again, this offers a terrific way for advisors to get their foot in the door with millennials who will soon control the majority of financial assets in the market.

Advisors also need to be proactive in engaging the children of their older clients. One way to achieve this is to provide a full-service offering to the children, which is partially subsided by their parents. Another less formal option is to encourage clients to bring their children to financial planning meetings. Establishing relationships with the children of clients early on will build trust, while also increasing the chances that they continue to invest their parents’ assets after inheritance.

Perhaps the most effective way to attract younger investors is by implementing modern financial tools and digital communication methods with which millennials are comfortable. We know that millennials respond to newer digital tools for financial planning and portfolio construction, including client portals where they can review their assets holistically online. Offering these products will go a long way in making millennials comfortable working with an advisor. Beyond these tools, it is also important to communicate in a manner that younger investors will find effective. One useful strategy is to leverage your younger advisors and make them client-facing for millennial investors.

By establishing demographic-friendly offerings, proactively involving clients’ children in the advising process, and implementing strategic digital communication methods, an advisor can cut through skepticism and build strong advisor-client relationships with millennial investors. Advisors who take the time to adjust their businesses to the needs of the next generation will be best positioned for success down the line.

Matt Matrisian is Senior Vice President, Strategic Initiatives at AssetMark, Inc.

End Notes
1. Source: Bureau of Labor Statistics
2. Source: Platinum Summit Group

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