In 2019, millennials became the largest generation in the United States, passing baby boomers. According to the Brookings Institution, more than half of all Americans today are millennials or younger.
So it’s not surprising that this generation is gaining ground financially. In 2021, the aggregate assets of Americans under age 40 leapt 25%, from $2.9 trillion to $3.6 trillion, as measured by Cerulli Associates. That was the biggest annual change of any generational group. Millennials (who are defined as those born between 1981 and 1996) are expected to inherit between $30 trillion and $68 trillion over the next decade.
“It’s a great time to start to build out the next-gen aspect of your business,” says Zach Ungerott, a senior wealth advisor at Hightower Wealth Advisors in St. Louis.
But how exactly should advisors serve this population? What misconceptions, outmoded habits, and legacy practices may be hampering your ability to connect with these younger clients?
Advisors under 40 have suggestions.
Dispelling Misconceptions
One primary problem is that there are so many incorrect assumptions about this group. “Advisors think next-gen clients are simplistic,” says Stacey McKinnon, chief operating officer, chief marketing officer and wealth advisor at Morton Wealth, an RIA in Calabasas, Calif.
That couldn’t be farther from the truth, she insists. These clients are no longer twentysomethings thinking only about their student loans. More likely they are “married and in the prime of their careers, buying real estate, growing their families, and making $300,000 or more of joint income,” she says.
Their wealth tends to be “spread out in different ways,” she acknowledges. It’s not all in stocks, bonds or retirement accounts. “It might be in cryptocurrency, real estate or stock options.” Even if they haven’t amassed much wealth yet, many of them have high incomes and “will quickly become wealthy,” she says. “Are we going to wait for that? Or are we going to create a model that can serve them now?”
Next-Gen Clients Don’t All Want Robo-Advisors
Those born after 1980 consider themselves “digital natives,” having grown up with smartphones and the internet. They are comfortable with technology and prefer using it for many transactions. However, McKinnon says, “that only makes their desire for human connection more important.”
So no, they don’t really prefer robo-advisors. In fact, they are wrestling with complex financial decisions requiring human interaction—trying to decide whether to open a 529 college savings account for their kids, for instance, or whether to buy a second property for rental income. “I don’t think robo-advisors are going to cut it when it comes to giving them the advice they want and need,” McKinnon says.
But the firms they work with must have up-to-date high-tech equipment. These clients “want great technology tools and a person who can help them drive decision-making,” says Kyle George, vice president at Johnson Financial Group in Madison, Wis. Anyone can Google “Roth conversions,” he adds, but a planning relationship is about a deeper, more personal understanding. “When I meet these clients, we talk about values and lifestyles,” he says. “We talk about charitable giving and community involvement. Their wealth is an expression of their identity.”
Virtual meetings are usually preferred, too. “No one younger than 40 is excited to get a phone call,” he says. “Texting or email works great for any quickly addressed items.”
No Time To Waste
Indeed, next-gen folks are used to having their questions answered at the speed of the internet. “These clients live in a highly curated world that knows their interests and quickly serves them,” says Curtis Congdon, president of XML Financial Group in Falls Church, Va. “So once you have a younger client’s trust, get to the point. Stop saying the things you want to say, and start listening for ways you can deliver value.”
If you are stuck in your old ways, he cautions, younger clients will find somebody else. Jordan Hanson, a certified financial planner at HCR Wealth Advisors in Los Angeles, puts it this way: “Younger clients want to consume financial advice on their own time and in bite-size increments. They do not want an hours-long presentation or 100-page plan.”
He recommends breaking up financial plans into segments that can be presented at different times, perhaps at critical life events.