Advisors who want to recruit Gen X and Gen Y members as clients should look to the children of their existing clients who are in or near retirement, says Jason Whitby, senior financial advisor of Investor Solutions.
Top firms use active marketing, reaching out to younger investors in person, says Seth. But many advisors are not doing this with the children and even grandchildren of their existing clients, Whitby says.
"This is an added value you can offer your high-net-worth clients," he says. The risk is that the advisor can alienate the original high-net-worth client if the children do not do well but that can be offset by communicating with all generations through simple conversations.
Whitby was part of a recent webinar sponsored by By All Accounts entitled Acquiring the Next Generation of Wealth: How to Attract Gen X and Gen Y Clients. Gen X are those in their thirties and forties born after 1964 and Gen Y were born between 1977 and 2001. They do not control the bulk of the investments as yet, but are an underserved population that advisors should target, the members of the webinar panel say.
"These potential clients may not have much to invest now, but they will have and they want to feel part of the team, so advisors have to fine tune their message to younger people," he says.
Cynthia Stephens, vice president of marketing for By All Accounts, says younger investors are looking for knowledgeable advisors who know more about investing.
For those Gen X and Gen Y members who are not willing to put off their wishes to save for a distant future, Andy Seth, managing partner and co-founder of Lotus Group Advisors LLC, says he often advises them not to delay their wishes.
If they "do not want delayed gratification, financial advisors who want them as clients need to know this. Gen X and Gen Y are not going to cut back on the things they like, so we tell them to spend extravagantly once in a while," says Seth.
Seth has clients who wanted to take a luxury vacation. Rather than telling them to put off their trip, Seth helped them to arrange three months off work to travel, after which they returned to work.
Seth agrees with Stephens that Gen X and Gen Y do not want to know everything about financing; they want to deal with someone who knows more than they do. They want financial advisors who understand they may not want a delayed life plan.
At the same time, this is the same age group is that most fearful of losing their jobs, according to a Mercer Workplace Survey completed in September. Overall, the jump in the number who fear for their jobs went from 36% last year to 42% this year, but for workers ages 18 to 34 it went from 31% a year ago to 48% this year. This increases the market for financial advisors to reach out to this group.
Another difference that sets off Gen X and Gen Y from baby boomers is that they are more technology savvy than the baby boomers. Which is why Jeff Rose, CEO and founder of Alliance Wealth Management LLC, says he created a firm to allow him to do as much as possible online and through social media. "There are 800 million users of social media and you need to go everywhere they go," he says. Rose says his most important tool is his blog.
"Once you write about something, you are an expert. Share your knowledge, but also share your personality," he says. "I make sure I put something of myself on there so I am more than just a financial advisor. People then feel like they know you when they make that first phone call."
"Put up videos, as well as publishing your knowledge," he advises. You get talked about and referred to others. "Make yourself accessible in every way possible."