Two-thirds of financial advisors with older clients may get pink-slipped by Millennial children as their parents’ head into retirement.
$30 trillion in wealth will transfer to the younger generation in the next 30 years, and many will already have their own financial advisors with whom they have a trusted relationship while others, according to a Forbes magazine article, ‘don’t feel comfortable’ with their parents’ trusted advisers and regard them as ‘difficult to work with’ or ‘out of touch’.
That’s not an unreasonable perception in a space where only 30% of personal financial advisors are women and only 21% are minorities (2016) leaving male financial advisors – the average of whom are white and over fifty – can have an annoying tendency to underestimate women’s ability to manage finances, despite research showing that they’re overall better investors than men, earning more on their investments annually and less prone to risky financial behaviour. Women own 30% of the wealth globally and over half of personal wealth in the United States and that percentage will only increase. Never mind the fact that the number of female millionaires has grown and women are graduating from four-year colleges more than men. Millennials were born into a multicultural and gender-diverse world, and grew up in a digital age where an older advisor may not be as comfortable or as savvy with technology. So how does a financial advisor today reach out to the younger generation and gain their trust before it’s too late?
Financial advisers looking to ‘inherit’ Millennial children from their parents have two factors in their favour:
- They can get a referral from someone Millennials do likely trust: Their parents.
- Millennials, unlike their elders, are far more open to talking about salary and personal finance.
One thing Millennials share with other generations: only about 24% are financially literate. Only 27% are willing to ask for help, but they’ll respond positively to a kind offer. Persuading them to engage with an advisor or wealth manager isn’t difficult if you speak their language.
A study conducted by Millennial Disruption Index shows that 71% would rather visit the dentist than listen to a bank message. Traditional advertising won’t work here. If you can’t reach them via their parents, or you’d like to increase your Millennial clients or membership externally, you want to communicate a message that reaches out to them about your financial knowledge and experience and to give them a reason to trust you.
What do you have to offer?
How well do you understand their goals and life objectives? As the venerable advice goes, “Show, don’t tell.”
It’s common knowledge Millennials are largely addicted to their mobiles and tablets. They also value highly personalized service. This point should be of particular interest to credit unions whose primary appeal is personal relationships with their members, along with that hometown, community support feeling people used to get from banks before they consolidated and merged. American banks face ongoing trust challenges in the wake of the 2008 financial collapse. They and other wealth managers must figure out how to work with the biggest generational demographic as the Baby Boomers pass on – and establish relationships with a generation marked by less conservative financial planning and more attention to community and social factors, along with the timeless concern about fees and fairness.
One challenge is that the younger someone is, the farther away she is from a distant stranger called Future Me. Recent brain research reveals an interesting finding in how everyone, not just Millennials, relate to the future.
There’s one part of our brain that processes our feelings and ideas about ourselves and another part that handles how we feel about others. Our idea of our future self – particularly what we’ll be like in some distant future – is processed in the part of the brain that thinks about others, not the part that thinks about ourselves in the present. Since “myself” is the most important person to almost everyone on earth, Present You is a lot more important than Future You.
Talking to a Millennial about the importance of planning for retirement is like trying to convince someone they need to make a monthly donation to help a child in poverty thousands of miles away. Some may respond sympathetically and donate money to help. Many people though, won’t resonate with that unless they can see the child, either living in poverty or looking much better after someone helped financially. Visuals are emotionally visceral. You either want to help that poor child or make another one smile like the happy child in the photo.
When Millennials visualize what their distant future looks like, with positive reinforcement rather than an elderly life on the streets, you communicate a stronger message about the importance of planning early for the Future Me they’ll meet sooner than they realize.
Another tactic is to ask them what obstacles keep them from planning for their life goals now. Research shows when you address and confront the roadblocks to something you want to do, you’re more likely to devise a strategy to accomplish it.
A creative, friendly, personalized and custom-branded video can paint the picture of a rosy retirement. Or, for example, how a car payment would be more affordable if the loan was taken out through a low-interest credit union.
A great interactive video can offer advice on how one could pay off a loan or a mortgage faster or provide a better explanation as to the various credit card options available so a client can truly choose the right one for her needs.