Boston: “I’m going to be honest with you,” stated Rick as he prepared himself to spin his tale, “Everybody’s talking about getting the next-generation investor, how to target the millennials. I could give a flip about millennials—they don’t have any money, they're a pain in the a__, and I’m going to be retired within 10 years anyway.”
OMG! Come on, Rick, tell me how you really feel. Forget about Rick’s feelings towards millennials (how would you like to be one of his children?). Without realizing it, he provided an MRI of how he runs his business. It’s not client-centric. Hardly! It’s all about Rick, and your guess is as good as mine regarding the relationship he has with his clients.
Unfortunately, Rick’s not alone in his thinking. Agreed, he’s obnoxious about it, but although every firm is asking their financial advisors to work with the next-gen (affluent clients’ children), they are making it difficult. How? By how they define a “household,” the level of assets of which they pay advisors, and the mechanical platforms in which they are parking these smaller accounts (many of them millennials) where the firm is collecting fees with no advisor involvement.
Let’s forget about Rick for a moment. Let’s look at this issue from the viewpoint of the largest demographic in history: the 79 million who will receive the largest transfer of wealth in history—over $30 trillion… millennials. Within the past 12 hours I’ve had two purchase decisions that were impacted by millennials and provide a window into their decision making.
Purchase 1: First, I needed new tires for my BMW. It’s a leased car with six months left on the lease. It has run-flat tires which I hate, and they cost me over $2,000 to replace in order to pass my one-year inspection. So I inquired with Kevin, my millennial co-author of the Indispensable LinkedIn Sales Guide. He tells me the auto-repair garage down the block is great; they have a young guy who really know tires and will save you a bundle.
Voila. The young guy is a millennial working in a garage of older grease monkeys; he takes time to look at my tires, takes out his laptop, goes online, and within minutes is reviewing my options. I saved over a thousand dollars on tires—thank you, millennials.
Purchase 2: Last night I’m sitting down for a drink with my wife Sandy, who’s running late because she was in the Verizon store inquiring about phones as our contract was up. I’ve got to paraphrase her comments, “I hate going in there—it’s just so confusing, so many options, all these new phones, you can buy or lease. You need to walk in there and talk with them for 45 minutes just to get a basic understanding of all this mess.” Ouch!
Not a fan of these stores either, I gathered opinions from my millennial associates (Stephen and Kevin) who’ve both recently purchased new phones (Samsung and Apple). Like my tire guy, within seconds Stephen was on a website that was reviewing all the phones, specs and prices. Within five minutes of talking to them about their phones, I’d made my decision.
So what does this have to do with you? Everything!
Believe it or not, millennials spread word-of-mouth faster than boomers, but they take a multifaceted approach: They talk, tweet, text message and post. In their circles, word gets around a lot faster than it does with boomers. So what’s a financial advisor to do?
Hire a millennial or two. Whether it’s as a junior advisor or a certified financial planner, they will be invaluable to you—if allowed. In other words, this isn’t all about the amount of new assets you can bring in (although that never hurts); it’s about connecting with next-gen affluent clients, next-gen referral alliance partners and so on. It’s about taking you into their soon-to-be $30 trillion world and discovering what’s important to them, how they make decisions, where they turn for advice. And yes, it’s about getting their advice on issues I outlined above.
The following are a few data points that might be of interest:
61 percent think they might need the help of a financial advisor at $250,000 of assets or less (23% – $250K, 22% – $100K, 16% – $50K).
94 percent agree with the statement, “I can find an online video for nearly anything I’d like to learn how to do.”
59 percent think they can find the answer to a question using their smartphone in 30 seconds or less.
98 percent send and receive text messages.
20 percent use their parents’ financial advisor.
From our perspective, the entire financial services industry needs to think long-term. Whether it’s $30 trillion or $50 trillion that’s going to be in motion over the next couple of decades, a lot is at stake. Sure, the robo advisor has made their statement and so have the millennials.
It’s unlikely that the first move of a millennial who inherits $3 million will be contacting a robo advisor. Yet, firms are marketing their robo model to millennials with low levels of assets and hoping that later, when these same millennials have substantial assets, they’ll hire a financial advisor from their firm. Good luck with that!
Millennials are very savvy consumers, whether it’s shopping for tires or financial services. The more likely scenario is that they’ve already compared the non-advisor services they’ve been using to those of other robo advisor firms; cost, features, benefits, etc. And since only 20 percent are using the same advisor as their parents, the flaw of these next-gen campaigns has already been exposed. Our research tells us that millennials will decide if they need the services of a real financial advisor, and word-of-mouth influence will likely be their most prominent route in finding their advisor. No different than boomers exiting those hippie years, millennials are soon to be the major economic force in our world. So, Ricks of the world, get with the program: Millennials rock!