Millennials and Gen Yers constitute 47% of the U.S. population and inherit $541 billion each year, so getting savvy at creating meaningful marketing and service offerings to attract next-gen clients could very likely dictate the future success of your firm.

While the sheer size and wealth potential of these clients make for robust opportunities for advisors, some pitfalls need to be avoided, especially since the majority of firms are far more adept at working with baby boomers and Gen X clients using an AUM model, advisors say.

Statistics bear this out. Cerulli Associates reports that some 80% of next-gen investors fire their parents’ advisors in the first year after inheriting wealth.

Figuring out how to create meaningful offerings and compensation can mean the difference between holding on to and growing a next-gen client base now or having to prospect to replace clients in the future, panelists at FSI’s annual conference in Orlando, Fla., said last week.

“We’ve become very good at holding on to these assets now, but it took us five years to find a cultural fit,” said Christine Byrne, a partner with Back Cove Financial in Falmouth, Maine, who said hiring a younger advisor to work with clients’ adult children and grandkids helped.

“Younger clients in their late 20s to mid-30s can get asset allocation at our firm for a subscription fee and then flip to an assets-under-management fee when they hit our minimum. We see them actively growing their assets to become AUM clients. If you want to become a client of Back Cove, regardless of your age, we have a program for you,” Byrne said.

Instead of an all-out financial planning session, younger clients often prefer 15-minute conference calls to tackle specific subjects they’re interested in. “It’s a different type of relationship than we have with older clients and they value it deeply,” she said.

Back Cove’s experience is borne out by recent Fidelity research that found that 74% of millennial and Gen Z investors are more willing to pay for advice, compared to 50% of baby boomers. The study also found that the younger generation sees an advisor as their “accountability partner” and “behavior coach” rather than as a traditional asset manager or planner.

Instead of shooing away requests to help adult children figure out their Roth IRAs, Byrne said she keeps ego out of the equation and looks at the task as an opportunity to keep their parents “$2 million account.”

“Contrary to the beliefs of many advisors, young investors can be attractive and profitable clients, especially over time," Gwendaline Mazzara, vice president for practice management at Fidelity, told advisors at the conference. "Start communicating to them now. You’re licensed. Kim Kardashian is not.”

Mazzara pointed to Fidelity research that has found that next-gen investors are motivated to improve their finances, prefer to consolidate assets with a primary advisor and are loyal clients.

Millennials and Gen Z investors are also at the age when they first start to establish financial advice relationships, the firm’s research found. 

Since 56% of millennials and Gen Zers intentionally go to social media to find financial advice, Fidelity suggested that advisors up their social media game. “Think creatively how you show up online to meet Next Gen’s need for financial content—and do it regularly,” Fidelity said.

The firm also recommended creating a niche offering for next-gen clients. “Whether you want to focus on young dentists or social media influencers, consider building specialized expertise and a focused offering for the young clients you most want to serve," Fidelity said." This will help you stand apart from other advisors.”

Joseph Kuo, CEO and founder of Haven Tower Group in Santa Monica, Calif., said advisors should meet next-gen clients where they are by creating deliverables that are important to them, such as 401k asset allocation services, instead of telling them everything they did for their parents.

Kuo also suggested that advisors work to determine the specific next-gen demographics they want to attract so their service offerings and marketing are aligned with their recruiting and public relations. “If you’re all over the place, marketing and PR will eventually collide with the realities of your business,” Kuo warned.