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.”