This is part 2 of a story that ran in the April issue of Financial Advisor magazine. Click here to read part 1.

Gregg Fisher founded New York-based Gerstein Fisher at the age of 21. Now 45, he reminisces about his early days as a fee-only planner serving clients who most advisors passed over.

“The idea of an investment advisor serving a bunch of people of moderate means instead of a few wealthy families wasn’t there,” Fisher says. “I was 21 and brand new, I figured nobody old and with a lot of money would talk to me. I ended up talking to people my age who didn’t have a lot.”

As it turns out, Fisher was presaging a new breed of advisor that may come of age with the millennial generation.

Millennials, born between 1980 and 1999, want financial assistance, but advisors aren’t reaching them effectively, says 30-year-old Brandon Marcott of Waukesha, Wis.-based Edify Financial Planning.

“Millennials are looking for someone who won’t simply tell them what to do next,” Marcott says. “They are concerned with what they need to do now. The long-term focus just isn’t their primary concern.”

Advisors probably ignore millennials because of their lower net worth—but should they wait until millennials save $250,000?

“It used to be that advisors didn’t step in until wealth was accumulated,” says Joe Clark, an Indianapolis-based CFP. “That won’t work with millennials. You have to help in the accumulation phase. I don’t think the industry is ready for that.”

If advisors want to serve millennials, they need to capture the business before the clients accumulate assets. That’s why Marcott and other advisors joined the XY Planning Network. Founded in 2014, the network nurtures planning practices targeting millennial and Generation X clients.

While millennials’ difficulty accumulating assets repels many advisors, for XY Planning Network advisors it makes little difference.

“Most of my revenue isn’t from asset management,” says Andrew Mohrmann, the 30-year-old founder of St. Louis-based Modern Dollar Planning. “You have to charge differently when you work with young clients.”

Modern Dollar serves young professionals balancing rising incomes with high debts, and over 80 percent of Mohrmann’s clients and managed assets are from millennials.

The XY Planning Network’s model calls for advisors to offer a flat fee to meet with clients and a monthly or quarterly retainer for ongoing advice. Advisors must have their CFP certification and be sworn fiduciaries.

Millennials respond positively to the model, says Daniel Wrenne, founder of Lexington, Ky.-based Wrenne Financial Planning.

“My average client is 35, most of them are millennials,” says Wrenne. “Around 25 percent of the assets we manage are in millennials’ accounts. It would normally be lower, but several clients received inheritances recently.”

Sophia Bera, founder of location-independent Gen Y Planning, says millennials make up most of her 43 clients.

“I would say 80 percent of my revenues are from millennials,” she says. “I have a few Generation Xers, but all my clients are under 42.”

At 39, Marcio Silveira, a planner at Arlington, Va.-based Pavlov Financial Planning, is not a millennial. After 15 years in the industry, he adopted the retainer-fee service model and pivoted toward serving younger clients.

“The major factor for being able to become a client is the income to pay fees,” Silveira says. “Many advisors won’t serve someone without assets or who only has assets in a 401(k) because they can’t bill on that. In my case, that’s not relevant.”

As traditional forms of advice become commoditized by technology, planning increases in value, says Noah Morgan, 31, co-founder of Fenton, Mich.-based Acorn Wealth Advisors.

“Behavioral advice is not a commodity,” Morgan says. “For things like investments or tax advice, inexpensive resources are widely available, so we must find other things to do for our clients.”

Before tackling debt, clients need basic cash-flow management assistance, says Tyler Landes, founder of Kansas City, Mo.-based Tandem Financial Guidance. “Young couples want budgeting help; they’re starting to make higher income but want to get their ducks in a row.”

The planning process doesn’t change for lower-net-worth clients, Silveira says.

“They’re worried about insurance protection, buying a home and saving for education,” Silveira says. “At this stage, it all has to do with cash flow. They need funds for insurance premiums and down payments.”

Wrenne starts clients on a guided cash-flow management plan.

“Budgeting is time-consuming, so I use a simple system,” Wrenne says. “They document how much cash they had at the beginning and end of each month, and then document how much money came into the account. I have people tell me how much they think they’re spending. We back into their actual spending, and it’s always higher than they estimated.”

Millennials are concerned about short-term goals like tackling debt, says Wrenne. Because of regulatory changes, student debt management is more involved than mailing a monthly payment.

“That’s how it used to be, but it’s become ridiculous,” says Wrenne. “There are eight repayment options, different loans and services, different forgiveness programs; those programs tie into your taxes differently. There are different refinancing companies, and rates have increased. Debt’s complicated.”

Firms with the XY Planning Network, whose clients are usually made up of at least 50 percent millennials, assets under management can be a cringeworthy, or negative, number.

“I joke that I manage as much debt as assets—probably even more [debt],” says Bera. “People have to figure out their student loans, but a lot of planners don’t have a clue how to work with debt. It’s a great opportunity.”

Advisors can also add value with education planning. Millennial parents are aggressive education savers. According to a recent Fidelity study, 71 percent of millennials save for their children’s education, and half plan to cover the full college cost.

“I talk to clients about whether they are managing their debt efficiently; that advice is as valuable to them as managing their asset,” says Mohrmann. “At the end of the day, I want to be able to show them that by working with me they’ve saved themselves more.”

Some young clients have to be coaxed into saving.

“Savings rates are not at 10 or 20 percent,” says Morgan. “Most millennials can meet their basic needs, but don’t realize that how they’re met in retirement comes down to savings behavior. The digital tools don’t instill discipline.”

Some frame saving as something other than a retirement plan. Marcott responds to his clients’ reluctance by having them save in different vehicles.

“It’s still a focus, but the percentage of assets saved towards retirement are less,” says Marcott. “We save in vehicles that don’t have restrictions of a retirement. Maybe we do a Roth IRA contribution, that has more flexibility; maybe we do 401(k) up to the match and the rest in a non-qualified brokerage account.”

Advisors may need to change fee models to serve young accumulators. XY Planning’s fee model—a onetime on-boarding charge, then a monthly retainer—seems to suit millennial finances.

For Marcio Silveira, adopting the retainer-fee model led to a millennial-focused practice.

“I wasn’t paying attention to millennials until I realized their demand wasn’t met by traditional advisors,” Silveira says. “I had started a firm marketing to boomers. It was petering out, but I had interest from younger folks who wanted this hourly model. I realized this was an opportunity.”

Through the retainer model, advisors grow their practices as they improve clients’ finances. But not all XY Planning firms are alike. Landes structures fees based on 1 percent of family income and 0.5 percent of net worth.

“I add more value if a fee can adjust to meet a client where they are,” Landes says. “I haven’t gotten to either extreme of that scale. We don’t go negative with the net worth, or I might be paying clients, especially those with student loans.”

Wrenne uses a three-tiered service model, charging a onetime, hourly fee for plans and projects.

“Our flat-fee model is for continual planning,” Wrenne says. “There’s an amount up front, then a couple hundred bucks a month. It’s like an on-call service. We also manage assets for a fee, but it’s a small percentage of our business.”

With a little patience, firms can serve millennials with traditional fee structures. Fisher charges 1 percent AUM, understanding that it may take time for accounts to generate revenue. Like many advisors, he isn’t profit hunting.

“If you want to make the most money in finance, this is not the way to do it,” he says. “You have to have an enjoyment of working with young people.”

Marcott, who charges clients a onetime $500 fee and a $100 retainer, says the retainer model keeps clients engaged.

“I’m here when they need advice,” Marcott says. “The retainer fee gets them me: Whatever I can help them with, I help them with. The idea is to have closer, intimate client relationships.”

Advisors also need new methods of connecting with millennials, says Bera. Millennials want high levels of engagement. Video chats, text messaging and e-mail are important for staying in touch.

“I’m location independent, so I can work with people across the country,” she says. “Millennials want advisors to work with them in a virtual way. My clients don’t want to come to an office during their workday; they want to Skype with me in the evening or the weekend. I meet babies and puppies that way, which is really fun.”

Pam Capalad’s planning firm Brunch & Budget is also location independent. Clients book appointments at a restaurant of their choosing, or meet over video chats, and she walks them through the planning process over brunch.

“I wanted to talk to clients like they were friends in a casual setting,” Capalad says. “Young people are afraid they’re going to be judged because they didn’t learn what they were supposed to do with money. Smart and talented people are embarrassed about their finances. Discussing it over a meal chills them out.”

Trace Tisler, a partner at Hudson, Ohio-based Epic Financial, says technology is essential to scaling down his fee-based practice and enabling him to deal with a larger volume of clients.

“I use it for data gathering and for meetings,” Tisler says. “Technology makes compliance and back-office stuff easier. It also helps me monitor clients’ savings and give them encouragement when they hit their goals and intervention when they don’t.”

And technology is an effective way to prospect for millennials.

“It doesn’t have to be complicated,” says Landes. “Get a web page with good search engine optimization, because millennials will look you up before contacting you, even if they meet you at a networking event.”

Content should be kept short and simple, and updated frequently.

“I’m constantly posting articles that I’m quoted in or publishing geared towards the education that I provide,” says Eric Roberge, founder of planning firm Beyond Your Hammock. “People say social media is not that great, but I’ve had clients find me through my posts. Social media allows you to passively stay in front of your network.”

Roberge uses a social media tracking and posting tool called Hootsuite to automate his postings throughout the week, which has reduced his social media management time to a mere 30 minutes a week.

By prospecting with original content, XY Planning advisors attract like-minded clients.

“I give clients an idea of who I am and how I think about money,” says Marcott. “I don’t do traditional marketing. My prospecting is being myself online. I want clients who live intentionally and have an abundance mentality. I’d say 75 percent of my clients work with me because I talk about my beliefs. It’s easy to transition into working relationships with clients who relate to you.”

While most XY Planning Network members prospect digitally, Fisher finds millennial clients using referrals.

“I also find clients at marriages and bar mitzvahs,” he says. “There’s a lot that goes on [at] those events involving young people. Advisors can offer them a lot of guidance.”

Silveira networks to generate referrals from firms who don’t serve low-asset clients.

“I go to FPA meetings and get good referrals because the people reaching out to them don’t meet their minimums,” Silveira says. “Other FPA members feel comfortable sending these clients to me.”

Firms serving family wealth often attempt to include clients’ younger relatives in planning. Troubled by statistics that suggest nearly three-quarters of generational wealth transfers fail, Brown Brothers Harriman is studying ways to bring millennials in for multi-generational planning. BBH’s approach now keys on open communication between advisors and clients’ children, says the firm’s Scott Clemons, chief investment strategist.

“If we’re meeting with Mom and Dad to talk about family wealth, we’ll suggest that this is an opportunity to bring the kids,” Clemons says. “If they’re open to suggestions, we lay ground rules—what do you want us to address, what topics should we avoid. We find that Mom and Dad never thought of how the next generation will manage their money.”

But there’s risk when advisors speak with young adults on behalf of older family members. Many times, the advisor is only speaking with clients’ children as a favor, Landes says. “When a young person picks up on that, trust is obliterated.”

Tisler adds that advisors don’t necessarily want the clients they would attract this way.

“I feel it’s better to prospect directly,” he says. “That means whoever reaches out to you has a reason to do so. The kids don’t engage because it isn’t personal to them. Work with people because they want to be worked with.”

Bera says that engaging the younger generation of clients should also involve a younger generation of advisors.

“If you don’t start forming that relationship with people before they’re in their 40s, you can miss,” Bera says. “People want to work with a planner within 10 years of their age, so if you are a boomer serving older clients, hire younger CFPs, bring them into family meetings and have them talk to the younger relatives.”

While the XY Planning model is unproven, there is precedent that shows working with young clients pays off. After 20 years, a practice focusing on low-net-worth clients can grow, like Gerstein Fisher, which now manages more than $2 billion in client assets.

“A lot of our clients were these young accumulators who started with us in their 20s and are still with us now,” Fisher says. “They’ve become quite wealthy. These are people we got going early on and we grew with them.”

Marcott says that if advisors don’t adjust to serve millennials, they risk losing their business to planners with alternative practice structures, to digital advice providers or to a mainstream brand.

“Long term there’s definitely a risk that millennials will look elsewhere,” Marcott says. “Technology is going to increase, costs are going to go down, and eventually there’s no way the traditional AUM structure is going to fly.”

When millennials are able to support asset fees, they won’t need the traditional flavor of financial advice, says Morgan.

“Advisors will attract millennial accumulators if they focus on developing the client’s financial capabilities,” Morgan says. “If we got away from just investments to plan for the client’s life cycle, there would already be more interest from younger people. We can’t put a robo-advisor in place and think it’s going to solve all those problems. Advice is always going to be in demand.”