Advisory firm targets Gen X and Y clients

By Liz Skinner

Apr 8, 2012 @ 12:01 am (Updated 10:22 am) EST

Everything at oXYGen Financial Inc., from its unusual name to the Wii gaming system in its lobby, is crafted to appeal to the firm's target market.

While most advisers make little effort to cultivate so-called Generations X and Y — those between 25 and 50 — co-chief executives Ted Jenkin and Kile Lewis go after them with gusto.

The two financial advisers are intent on making the advising process fun for clients, so they created a unique lobby that includes an oxygen bar and a front-desk refrigerator for beverages.

They use YouTube and other videos to introduce the firm to prospective clients and to offer financial tips. The firm also employs social media, an unconventional sales approach and a high-volume, low-cost financial model to create what Mr. Jenkin calls a modern-day family office practice appealing to a neglected market segment.

“The Generation X and Yers are underserved because advisers think they have no money, which is untrue,” said the 42-year-old Mr. Jenkin, who noted that the segment is different from boomers and older investors.

“The X and Y generations are very busy and constantly in a state of flux,” he said. “The convenience and ease of getting all their products and services under one roof is valuable to them.”

The company offers its clients a range of planning services — investment, tax, legal and bookkeeping — with basic advising offered at $75 a month.

Located in Alpharetta, Ga., outside Atlanta, oXYGen has attracted 1,400 clients and $175 million in assets in three and a half years. Its average account size is about $230,000.

That's much less than the amount many financial advisers set as their minimum for new clients. But most advisers focus on clients who are nearing retirement age and have built up sizable nest eggs after decades of saving.

With his clients, the “sales pitch” is low-key and focuses on educating the individual or couple about the insurance or investment products they can incorporate into their financial plans.

And Mr. Jenkin always explains how he gets compensated.

“Many of the younger generations believe a lot of people in this industry are very shady, and they want to know how you get paid,” he said.

LONG-TERM RELATIONSHIPS

It's unusual for advisers to focus on younger investors, said Eleanor Blayney, the consumer advocate for the Certified Financial Planner Board of Standards Inc. and president of Directions LLC, a consulting firm.

“I think it's very smart,” she said. “Advisers should be thinking about what's coming next, and this is a market that's often given short shrift.”

Ms. Blayney said more concentration on investors in earlier age groups could help ease concerns many planners have about the attrition rate of younger clients, who typically leave their parents' adviser after inheriting money.

Mr. Jenkin said he markets his firm mostly through participation in local radio shows and through social media, including blogs, Twitter, text messaging and articles embedded in StumbleUpon, an Internet search engine that recommends content.

This population is in search of financial education, and all signs point to the younger generations needing help from advisers.

Generation Xers, generally defined as those born between 1965 and 1980, were especially hard-hit by the collapse of the housing market and are increasingly worried about how they will fare during retirement, according to the Pew Research Center.

FUTURE CONCERNS

Only 18% of Generation Xers said they are very confident they will have enough assets and income to last through retirement, according to a Pew study released in November. That's a decline from the 30% who said they were very confident in a 2009 study.

Those born in the 1980s through 2000, known as Generation Y, or the millennials, also have concerns about their financial future. In fact, 86% of those surveyed believe they will end up caring for an aging parent or another elderly person, the most recent Pew study found.

FINANCIAL ILLITERACY

Studies of the financial literacy of younger investors aren't encouraging, either, including a survey from TIAA-CREF that found 58% of Americans 18 to 34 don't know that contributions to an individual retirement account grow tax-deferred.

“Financial literacy among younger Americans needs improvement,” said Dan Keady, director of financial planning for TIAA-CREF, which released its survey last week. “When we engage with younger individuals and they see the benefits of compounding and tax advantages, they tend to contribute more to their retirement plans and other accounts.”

Mr. Jenkin doesn't expect large financial advisory firms to start focusing on what has become his core clientele until Generation Xers start to retire — and then they will have a lot of catching up to do in terms of communicating with and understanding this population.

“Younger people in their 20s don't even talk on the phone,” he said.

lskinner@investmentnews.com

  @IN Wire

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