Bridging the Generational Shift

Bridging the Generational ShiftBaby Boomers are arguably the largest generation in history and, for more than 20 years, they have remained the primary focus. Now, a change in strategy is essential to bridge the gap between this generation and the next.

For older financial advisors, connecting with the younger generation can be tough, making it difficult for either one to relate to the other. If you face this situation, you may want to consider hiring a younger advisor who can help forge relationships.

In the next five to seven years, it is estimated that more than $13 trillion of assets will move from one generation to another[1]. As a result, financial advisors must be prepared for these changes to make sure inherited assets will remain with them. The challenge, many financial advisers face, is figuring out how to forge and build relationships with the next generation.

It isn’t easy getting your foot in the door with your clients’ children or grandchildren. They have different wants, needs, and interests than their parents and grandparents. These up-and-coming young adults are the future of financial planning and are the clients you need.

You are setting yourself up for failure if you think your clients’ kids will automatically continue with you. According to industry statistics, almost 80 percent of all assets which transfer to the next generation will end up leaving their parents’ financial advisor[2]. Reshaping your practice to accommodate and attract this rising generation of investors will, no doubt, put you ahead of the game. Before you can market to them, it’s important you and you investment advisors understand them.

This generation is less loyal and more flexible than their parents, having grown up in a more flexible world; and they expect more flexibility in return. Being the first generation to have two working parents, they are more likely to have flexible work schedules, family leave options, and many more options than their parents did. To attract them, you must also be flexible and ready to offer a wide range of options to cater to their particular demands, at any time.

This generation is more knowledgeable about technology, than previous generations, and they use it. These young adults are used to having everything at their fingertips and getting their information in real-time. You need to be where they are – on the web, mobile, and on social media. Engaging in active dialogue through one-on-one meetings, digital media, social media, and live events lets them feel heard and appreciated.

This generation is notorious for spending instead of saving. Your job is to make financial investment exciting, so they begin to seriously think about their financial future. Engage these potential clients at the product level, company level and experience level to gain their trust. Rewarding them for their loyalty is a must and doing so, will prompt them to stay loyal to you.

Before you can reward them, you have to connect with them. Engage early, so your clients understand you want to work with their heirs. Not having contact with the children creates a situation where it’s easier for them to walk away when the portfolio changes hands. Meet them and get to know them. Talk about their life goals, not just financial goals. It’s easier to talk about money when there’s a goal that’s not just about the money. Recognize and consult with them during major milestones in their life – college graduation, buying their first home or marriage.

Gen X and Gen Y are perhaps more diverse than any other generations when it comes to race, ethnicity and culture. They are grown up and are earning money, spending it, and have become a growing important consumer to marketers worldwide. They should also be an important client to you.

Industry experts say Gen X and Gen Y will inherit more than $41 trillion in assets by 2052[3]. If you are not targeting Gen X and Gen Y as clients, you will pay a steep price. These up-and-coming young adults are considered the future of financial planning and are the clients you will need in order to grow.

Arguably being more in tune with what’s going on in the world, Gen X and Gen Y tend to be more concerned about things to come. Your job is to connect to them by showing interest, listening, and showing how your products and services can help them now and in the future. Connecting creates a sense of loyalty. Engage in active dialogue through one-on-one meetings, social media, and live events to make them feel heard and appreciated.

Recognize many Gen X and Gen Y’s speak foreign languages or have a family structure which is culturally diverse. It’s important you are able to connect to them at this level. Consider learning Spanish, for example, or hiring people that speak other languages. Explore and understand how finances and investing are viewed for each ethnic group. Though they have their own mindset and way to do things, they are ingrained with the principals instilled by their parents and previous generations. Once you understand their culture, you can use it to show them the importance of investing and building a financial future.

Another market not to be overlooked is the female investor. Today, women control more than 50 percent of today’s wealth[4]. “By 2019, two-thirds of America’s wealthy will be female”, reports Debra Nichols, director of women’s financial advisory services at Wells Fargo. “Over the next 30 years, it is estimated women will be the primary recipients of between $42 trillion and $110 trillion of inherited monies – the largest transfer of wealth in history.”

So why have financial advisors not focused on this emerging client base? Industry facts indicate more than 70 percent of women plan to seek out other advisors when their spouse passes away. This isn’t a growth conversation, but a retention conversation, similar to retaining and engaging the children of clients.

Women do not have a gender preference when it comes to the advisor they choose. Instead, and similar to the Next Gen segment, they do have a preference for particular service and engagement models and investing is much more about the “how” and not the “what.” By understanding the differences in buying styles, advisors can better understand how to approach women with financial advice, products, and services.

Many advisors, especially female advisors, are now realizing the importance of targeting this market segment. Though women make up only 13 percent of the broker dealer and financial advisor ranks, according to the 2012 Fidelity Broker and Advisor Sentiment survey, some are realizing they have an edge. They generate business differently than their male counterparts, in ways resonate with women.

The Fidelity survey found female advisors attend more networking events and in-person seminars than male advisors. And 71 percent of the females – versus 48 percent of the males – work with clients on areas outside of traditional investing.

“Working with female clients is generally more time-intensive, but they are also more loyal. Women will often be lifelong clients,” said Kimberly Foss, founder of Empyrion Wealth Management in Sacramento, CA.

Your financial success depends upon being strategic in the clients you work with. Get to know the demographic you want to serve and do everything you can to connect to them. This will help guarantee clients and prospective clients.

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[1] Wall Street Journal, The Next Generation, June 10, 2010.

[2] Investment News, Heirs take the money and run. November 7-11, 2011.

[3] Estimates developed and revisited periodically by Paul Schervish and John Havens, of the Center on Wealth and Philanthropy at Boston College.

[4] Mary Quist-Newins author of Women and Money: Matters of Trust

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