Financial planning isn’t just for Boomers any more

Wearing jeans and a T-shirt, 28-year-old Alan Moore didn’t look like most of the speakers at IMPACT 2015. Equally unorthodox was his message: Advisers are largely clueless when it comes to attracting Millennial clients.

Mr. Moore should know. He started an advisory firm in 2012, which he sold to Abacus Wealth Partners where he became Champion of Next Gen. He also co-founded the XY Planning Network, which helps young advisers who want to serve post-Boomer clients — Generation X (born from 1961 to 1980) and Generation Y/Millennials (1980 to 1999).

“This is not a niche market; it’s half the population of the country,” said Mr. Moore, who noted that at 92 million, Millennials represent the largest generation ever. Add the 50 million in Generation X, and that is 140 million people.

He also noted that $30 trillion will pass from Boomers to Millennials over the next 30 years. But he warned advisers to ignore that statistic because if that’s the only reason they are reaching out to younger people and they’re using a “Happy Meal” approach of offering younger clients a smaller version of what they provide older clients, it just won’t work.

Serving young clients requires a whole new way of looking at financial planning, Mr. Moore said, citing several reasons:

• Young people don’t have much money, so they are less interested in investing. That means that a fee structure based on assets under management is not viable.

• They have a whole range of problems that are much more pressing to them than investing for retirement. For example, they are buried by student loans and other debt. They are raising families and looking for ways to spend less time working. “They want to think about living great lives,” he said.

• They interact differently than older people. They are much more tech-savvy, and they often prefer texting or emailing to talking on the phone or face to face. They don’t have the time or interest to spend hours at a time discussing a comprehensive financial plan.

• They want to and expect to deal with an adviser close to their own age or in their own life stage. This is a challenge for the industry, since only 3% of Certified Financial Planners are under 30 – compared with 4% of CFPs who are over 70. The average age of a financial adviser is 56. Firms that want to attract younger clients are going to have to find younger advisers to serve them, and one main way to do so is to empower young advisers to help people their own age. If a firm is committed to this approach, young advisers will respond, Mr. Moore said.
He said that financial planning for younger clients involves less estate and tax planning, less high-level retirement and investing planning, and more discussion of debt management, lifestyle concerns, starting a business or a side job, taking mini-retirements or sabbaticals rather than traditional retirement, facilitating travel, and developing savings habits. Meetings are shorter and often virtual. The person in charge of the meeting is at the same life stage as the client.

Since younger clients typically have few assets, Mr. Moore suggests a fee structure like his own: An up-front fee of about $1,000 up-front to cover basic financial planning services and then a monthly fee of $100 to $200 or more, depending on the complexity of the work. A smaller monthly fee is easier for young people to fit into their budgets than a large yearly fee, he said.

Clients who want investment management pay 1% of AUM; Moore said advisers can keep their costs down by using robo-investing and similar low-cost tools. He also suggested that advisers create a list of one-off services and charge a fee for those.

“We see this as the future structure of how firms get paid to do financial planning,” he said, noting that it can create a profitable practice.

Mr. Moore emphasized that serving young clients is not for everyone, and advisers should not do it unless they are committed to changing their business model and everything from the way they attract and interact with clients to the way they find and retain advisers. But if they decide to take on the challenge, he said the rewards — both financial and in terms of helping clients live better lives — could be huge.

This article originally appeared as a special section in the December 14, 2015 issue of InvestmentNews.