Advice firms adapt to millennial advisers who want to help their peers

Many young advisers are persuading their bosses to accept lower annual minimum fees and make other modifications to appeal to young investors

Feb 23, 2017 @ 4:36 pm

By Liz Skinner

Young financial advisers are helping to convince the leaders of traditional planning firms that making their financial services more palatable to Next Gen clients will pay off.

Seeking to serve their peers, many young advisers are persuading their bosses to accept lower annual minimum fees from millennial clients, whose accounts tend to be smaller and less complex than older individuals, and make other modifications that appeal to young investors.

"The whole reason anyone gets into this profession is to help people, and with young professionals there is opportunity to add so much value and really help them," said financial planner Rachel Moran of RTD Financial. "There's not as much you can do for a 62-year-old who comes in and wants to retire at 65."

Young advisers sometimes run into roadblocks when they want to target clients like themselves because traditional firms often want to aim for older clients who tend to have the greatest wealth. Some advisers end up leaving their planning firms and starting their own businesses, but some, like Ms. Moran, are staying put and driving change at established firms.

(More: The time is now for young financial advisers)

Ms. Moran, who is 27, helped her firm enhance its Wealth Builder Program that is aimed at attracting young professionals who have less than $750,000 in investible assets and who need planning assistance.

For these clients, the firm halves its standard annual minimum fee to $5,000 for the first year, increasing the fee annually until the fourth year when it would be the full $10,000.

"We realize we're still not going to be right for everyone, but the program gives me the ability to work with some of my peers from within a larger firm," she said.

RTD Financial now has about 25 young clients, up from only two or three when she came on board in 2013.

The services the firm provides clients are similar, however, the initial discovery meeting is less involved with Wealth Builder clients, more technology is used with them and some of the meetings are done virtually instead of in-person, she said.

Younger clients tend to be more comfortable with technology, even though they still appreciate personalized help from an adviser who they trust. The biggest challenge is often figuring out whether it financially makes sense for them to pay for the help.

Elizabeth Clough joined advisory firm Rembert Pendleton Jackson about five and a half years ago and suggested her firm offer young clients a different way to pay for advice. At her firm, where three of its eight certified financial planners are in their mid-thirties, including herself, the standard firm fee is 1% based on assets, less for larger accounts.

"Let's have them pay a flat fee and then we'll switch them over to the traditional fees after they hit a certain mark," she suggested.

(More: Provide these services to attract younger clients)

Her idea was well received and today is the main way she's able to work with younger clients. She also can charge a project-based fee to young clients who don't need ongoing help.

"We have had a lot of people come in when they are in their thirties and forties and have a good start but not a large amount of assets," Ms. Clough said. "We're happy to work with them and grow them into the client we'd like them to be."

She meets with some younger clients outside the office, such as at a restaurant over lunch or in a coffee shop, because they are more comfortable there than in a formal office setting, she said.

Another firm, FJY Financial, began offering its Young Accumulator program about five years ago. Last year, it had almost half of its new clients sign on at this stage.

These clients pay a minimum of $4,500 in fees, as opposed to the firm's standard $9,000 minimum. The firm also requires young accumulators to be doing just that. They must be "saving aggressively" in their retirement accounts and investment portfolios, said Jon Yankee, a principal at FJY Financial.

Offering the younger service model is really an investment in the business, he said.

"We're investing in clients who are going to be great clients in the future."


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