Why and how to create customized advice

Wealthy Gen X and Gen Y investors want your help – their way

Sep 17, 2012 @ 12:01 am

By William Finnegan

Wealthy Gen X and Gen Y investors are sitting on billions and billions in cash and want your help.

But they want help their way.

“Most advisers tend to recommend generic portfolios rather than customized plans based on clients' needs and preferences.” That's what 54% of Gen Y investors and 42% of Gen X investors said when we asked about their attitudes to financial advisers in our recent MFS Investing Sentiment Surveys – compared with just 35% of Baby Boomer investors who felt that way.

To read the free MFS E-book, "Getting the Digital Generation to 'Like' the Market," click here »

In fact, when investors were asked to identify the criteria they use to evaluate whether an adviser is appropriate for them, the top two factors were the willingness to customize support for their specific needs and the reputation of the adviser, each cited by 80% of investors. The record of past financial performance was cited by 79% and personal rapport by 72%.

Let's focus on customization. You have to admit that your client base kind of falls into buckets, right? Based on time horizon and risk profile, clients naturally fall into groups, and for those groups you develop diversified models.

For Gen X and Gen Y investors, customization isn't really about developing solutions that are absolutely unique. It's more a matter of having clients feel that the investments you have chosen and the services you provide have been customized for them because you understand their needs and are addressing what they feel are their unique issues.

Perception vs. reality

Remember that perception really matters. As a result, my suggestion to advisers is always to double check your interactions with younger investors to make sure there are no disconnects.

Make sure that you are having authentic, genuine conversations about what that person needs and how your choices will meet their long-term goals. You don't have to beat the market. You just can't miss helping them meet their goals. And they've got to feel that your solution was crafted because you have taken their unique needs into consideration, not because you've selected a solution that fits your 40-year-old clients, for example, or your young clients who have a conservative risk profile.

It can be the little things that make a big difference. Most advisers pay no attention to the timing of product mailings. But savvy advisers can use something as mundane as prospectus delivery to customize service for younger investors and cement ties to them.

Explaining it to clients

Here's what you can say:

“Sam/Sally, have I explained that during the course of the year you are going to receive bundles of documents either electronically or in the mail? When you get them, give me a call. I'm just going to explain quickly what they are. Basically, they're all the legal documents you really need to have and that I want you to hang on to, because they tell you what's going on with the things you own. Now, I know we've talked about the investments and I've explained them, but it's not a bad thing to go over things again if you have any questions. So when you get stuff, give me a call.”

By speaking to your younger investors this way, you've just customized an aspect of the adviser-client relationship that many advisers ignore.

There are other ways to improve communications with the under-served Gen X and Gen Y market, and we'll tackle those in our next blog post.

About the Series

Financial advisers seeking to expand their business may not be aware of the potential afforded by Gen X and Gen Y investors. Wealthier than most advisers realize, these younger investors want help. But their expectations of advisers are different from those of Baby Boomers. Using data from his firm's extensive Investing Sentiment Survey, William Finnegan, Senior Managing Director of Global Retail Marketing at MFS Investment Management, offers insights into tapping this huge, underserved market through a series of six articles.

About the Survey

MFS, through Research Collaborative, an independent research firm, sponsors a regular online survey among individual investors with $100k+ in household investable assets and who make or share in making financial decisions for their households. Generation Y investors are those under the age of 33; Generation X is defined as investors between the ages of 33 and 47.

About MFS Investment Management

MFS is a premier global money management firm with investment offices in Boston, Hong Kong, London, Mexico City, So Paulo, Singapore, Sydney, Tokyo and Toronto. The firm's history dates to March 21, 1924, and the establishment of the first US “open-end” mutual fund. MFS manages $293.4 billion in assets on behalf of individual and institutional investors worldwide, as of August 31, 2012.

Please visit MFS.com/InvestingPulse for more information.

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