The financial adviser community for years has catered to baby boomer and post-baby boomer clients — folks who've already accumulated most of their life's wealth and are looking toward their golden years of retirement.
But a younger demographic of investors has emerged: the Generation X and Generation Y sets. These investors, born anywhere from the mid-1960s to the 1990s, are redefining the adviser/investor relationship.
While this newer contingent represents a horde of fresh prospective clients, the reality is that most advisers are closer in age to their retirement-aged clients. Connecting with the Gen X/Gen Y base can be a challenge that involves not only adopting a more tech-centric approach to communication, but also entails recognizing the investment goals and spending needs of younger clients.
There's a dearth of advisers who can help these generations plan for the future. Those who are willing to step up their game and make the necessary adjustments to meet the needs of Gen X/Gen Y stand to gain handsomely. Simply put: A lot of new business is up for grabs.
SPEAK THEIR LANGUAGE
Gen Xers and Gen Yers use technology for just about everything — from bill paying and entertainment to getting directions and staying in touch with friends and family. Introducing portals that resonate with young investors is vitally important.
This doesn't just mean staying hip to the latest app. Advisers should tap into the Internet and technology maelstrom to foster the kinds of conversations they've always had with clients.
Instead of simply e-mailing prospective Gen X and Gen Y clients an electronic brochure, advisers can post a five-minute YouTube presentation on the importance of asset allocation. Rather than going through a paper checklist of investing goals at an initial consultation, advisers can steer their clients to online
financial planning solutions such as goalgami.com that offer younger investors a hands-on approach, letting them plot out their own plans and goals while still getting expert guidance.
Gen X and Gen Y habitually glean advice from within their own communities — whether it's through direct contact with friends or through correspondence over social-networking platforms such as Facebook and Twitter. They're accustomed to sharing and receiving information from a variety of sources — from the layman to the expert.
APPRECIATE THE DIFFERENCES
What does this mean for advisers? They must acknowledge that their young clients are more likely to come to the table with their own ideas in place. Let Gen X and Gen Y clients explore their goals on their own time, within their own networks, then help them put their plans into action by building a strategy together.
While younger generations might communicate differently than more seasoned investors, their goals aren't wildly different.
Younger people clearly have longer time horizons and consequently are better-suited to more aggressive portfolios. They have time on their side to make up for short-term losses. And yet, given the shakiness of the financial markets over the past few years, younger investors surprisingly are apt to be more conservative than would be assumed. Most of them have observed only boom-bust cycles, and as a result, they tend to harbor a healthy skepticism about the market.
Not surprisingly, however, Gen X and Gen Y clients have different spending and investing needs than their boomer and post-boomer counterparts. Being mindful of these variations can give financial advisers instant credibility and offers a leg up with the younger set.
For instance: Younger folks are more likely to tilt toward lump-sum purchases, such as buying a home, than retirees. But both generations are keen to spend money on education. The difference is that older clients typically fund college for their children or grandchildren, not themselves. And having come through lean economic times, younger generations and retirees alike are eyeing big-ticket items, like a new car, and are looking for guidance on how best to finance that purchase.
Solid communication is the cornerstone of any meaningful adviser/investor relationship. Younger clients just expect to hear sound financial advice in different ways. Technology is just a starting point — listening to an investor's needs and plans, and offering expert advice, are still the hallmarks of a lasting relationship.
Neal Ringquist is president and chief operating officer of Advisor Software, which provides advice solutions for financial advisers and institutions.
