Preparing Your Practice for NextGen Clients

While they may currently only control 4% of the nation’s wealth, there’s absolutely no doubt that if you’re not preparing your firm to address the needs and preferences of millennials, you’re destined to be left behind. By 2030 (less than 15 years down the road) the investable financial assets of U.S. households should approach $65 trillion. The millennial generation’s share of those assets will grow the fastest, tripling from its current 4% to 16%. That’s over $10 trillion in millennial wealth that will need to be managed. Combined with their Gen-X predecessors, the two groups will hold nearly half (47%) of the nation’s entire wealth. 

Yet according to a recent Boston Consulting Group survey of wealth managers, more than 50% of firms have “no clear view on how to address millennials in terms of service model, products, and overall approach.”

As the first generation raised on iPhones, Facebook, Twitter and Google, millennials are perpetually connected and demand the highest standards of digital information delivery – not just of transactional capabilities but also of advisory services. While the technological lure of robo-advisors may therefore appear to be a difficult obstacle to successful acquisition, it’s important to understand that millennials are in fact exceedingly communicative, deeply cause-driven and socially responsible. Personal connections, albeit playing out in a digital rather than traditional face-to-face manner, are important to millennial prospects. And they place immense value on firms they see actively working to better the social condition.

Despite the popular perception of millennials as a bit narcissistic and self-indulgent, they are at heart values-based investors and, having reached adulthood amidst the biggest financial crisis since the Great Depression, tend to be far more conservative than their Baby Boomer or Gen-X predecessors. They demonstrate excellent savings behaviors, averaging an 8% salary deferral rate into their 401(k) accounts. But like the Gen-Xers who came before them, millennials will continue to be deeply challenged by a significant student debt burden.

Altering your course to meet future needs

First and foremost, take a critical look at your service delivery model (particularly as relates to technology) through the eyes of a millennial investor. Even if you think the millennial opportunity is still five years down the road, now’s the time to begin to slowly integrate new technologies and upgrade your capabilities. Start to get your team more comfortable “meeting” and working with clients using real-time collaborative platforms (e.g., Skype, GoToMeeting, Basecamp and Google Drive) as well as instant messenger and chat functionality.

From an advisory perspective, make a concerted effort to build out and demonstrate your socially-responsible investing expertise and capabilities. Begin establishing a strong reputation for your firm as community activists and philanthropists. And of course, as is the case with any constituency, it’s important to understand that millennials will want to see themselves reflected in the make-up of your firm. Just as women want to see women advisors and minorities want to see ethnic diversity within your team, millennials will want to see a strong presence of younger advisors in key roles if you expect their business.

Despite these and other evolutionary changes, one thing will always remain the same from generation to generation of clients – they want quick access to expert, personalized advice, anytime, anywhere, and by whatever means is most comfortable for them.

Coaching Questions from this article:

1. What steps are you currently taking to prepare your firm for millennial clients? How committed are you to modifying your practices, procedures and even team composition to achieve that goal?

2. Think about the present state of your technology, particularly as it relates to client communications. What are the most glaring deficiencies and how can you begin to move towards a more streamlined digital delivery of information and advice?

3. Think about your hiring plan for the future. Are you approaching it proactively with an eye on attracting NextGen advisors to ensure a durable and sustainable practice?