Millennials: Young and poor now, but your mainstay clients someday

They may not have money now, but executives say you should get ready for when they do

Apr 10, 2014 @ 2:31 pm

By Darla Mercado

If you want to stay relevant as an adviser in the future, then it's time to start ramping up your offerings to better serve tech-savvy Millennial clients.

Such was the theme at a panel discussion Thursday at the Securities Industry and Financial Markets Association's Private Client Conference in New York. The panel covered the latest factors that advisers need to take into consideration when weighing their service offerings in the future.

Millennials and Generation Xers were on the minds of the brokerage executives on the panel, as the younger crowd will be on the receiving end of major wealth transfers over the next few decades.

Some in the industry continue to dismiss the younger generation as a viable source of business, noted panelist Valerie Brown, chief executive officer of Cetera Financial Group. She recounted talking about Millennials and Gen X with a group of peers over cocktails Wednesday. “One of my colleagues said, 'Why do you care? They don't have any money,'” Ms. Brown recalled.

That's a mistake, she said. “We know that there will be a huge transfer of assets in the next couple of decades, and data suggests that most affluent [clients'] kids don't stay with their parents' advisers,” Ms. Brown said.

Advisers who want to work with those clients need to understand their unique needs. For one thing, even with a longer investment horizon, Millennials and Gen X clients are still gunshy about the market. Ms. Brown noted that 52% of these clients' assets are in cash, suggesting that young clients are distrustful of the market.

These clients are also consuming advice through multiple channels, including the web. “More and more, advisers need to continue to embrace multiple and online solutions, communicating with clients and extending it as a value proposition,” said Brand Meyer, head of the independent brokerage group at Wells Fargo Advisors.

When it comes to tapping that younger pool of clients, advisers may need to look at how they're charging for their services, Mr. Meyer said. “Advisers who help early on stand a better chance of retaining that client as they become affluent,” he said. “The business model needs to be aligned with the demographics.”

Ms. Brown said the younger generation tends to be skeptical of sales tactics, and seeks transparency and conversations with financial advisers. She noted that when it comes to the industry's ability to garner trust with clients, the biggest issue to address is fiduciary duty.

“The challenge we continually face is the continued concern that we're not putting the client's interests first,” Ms. Brown said. “The trend of going to a fiduciary relationship is overwhelming; it's clear that clients want it.”

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