7 steps to attract younger clients

May 11, 2021 9:48 AM

It’s no secret the advisor population is aging and a massive wealth transfer is looming. There’s increasing pressure to onboard younger clients and new talent.

What can be tricky for some firms is how to do it.

“They know they're going to have to start working with younger clients, but they're not quite sure who these clients are, what’s important to them and how they’re different from their traditional client,” says Jean Lynn Dunn, a client loyalty insights leader at T. Rowe Price.

The next generation of clients thinks differently about wealth and the markets, and because they’re not multi-millionaires, they’re not sure whether they’re qualified to work with a financial advisor, according to T. Rowe Price research, which surveyed 1,461 investors between the ages of 25 to 50 and 400 older than 50.

Scroll through to see how financial advisors can better attract the next generation of clients:

Cut the jargon

To better serve younger clients, advisors need to know how to talk to them.

The next generation doesn’t understand industry jargon, and they’re often ashamed to ask for clarification, according to T. Rowe Price research. It’s best to cut out any confusing language that risks alienating younger investors, or to at least guarantee you are explaining financial terms adequately in commonsense language.

“There's no American educational system that's educating our kids on financial planning,” Dunn says. “When they see the word ‘fiduciary,’ they don't know what it means.”

Dunn recommends firms do an audit of their communications, and take a look at what kind of materials they are sending to clients and how they are speaking with them.

Get online — or get better at it

Referrals are still the top way that clients find financial advisors, but the internet is a close second. Young clients are turning to Google for their questions, including where to find a financial planner.

“It’s critically important for financial advisors to have been cultivating their online reputation so that they show up, not just in search, but even [from building a] presence in social media platforms, so that this next wave [of investors] knows where to go when they're looking for financial advice,” Dunn says.

Social media can also be useful in engaging with existing clientele. Millennial investors, in particular, communicate with their planner through Facebook, Instagram, Twitter and LinkedIn, according to the research, with 29% of these individuals never having met their advisor face-to-face.

Advisors should consider embracing these channels and improving their presence on them in order to meet clients where they already are. They could also conduct their own searches to see where they currently rank in search results.

More than just retirement planning

Younger clients have different priorities than traditional wealth management clients, according to T. Rowe Price research.

Some advisors that overemphasize retirement or estate planning in conversations with clients — as well as in their social media profiles or marketing materials — run the risk of losing younger clients with different priorities, according to Dunn. Often shorter-term priorities, such as paying for a child’s tuition or taking care of an aging parent, take precedence before retirement preparation, she says.

Diversify your team — and your focus

High-earning multicultural households are growing faster than white households, but they are underserved in the industry, according to Dunn.

This is a “huge growth opportunity for financial advisors who authentically want to connect with a diverse segment,” she says.

African American, Latino, Asian, LGBTQ and women clients have unique attitudes and goals when it comes to working with an advisor, according to T. Rowe Price’s research. Advisors could do more to learn about those communities and connect with them, according to Dunn.

In addition, teams should prioritize hiring diverse teams that reflect the changes in the broader investor demographics. T. Rowe Price recommended expanding recruiting initiatives, such as internship programs, or recruiting from local universities or associations as well as adopting a requirement that 25% of the candidates interviewed for each position are drawn from diverse backgrounds.

Be a financial coach, not just an advisor

While traditional clients put much greater value on investment expertise, the next generation of clients are looking for someone to help with their whole financial life, not just their portfolios.

Clients say they want someone who will motivate them and help them take methodical steps toward their goals, according to T. Rowe Price research.

Overcritical messages, such as recommendations to cut out simple pleasure expenses, can turn off younger clients and create barriers to engagement. Instead, the research shows that aspiration is more effective in building trust.

“They already know they should be saving and investing more. Their issue is they don’t know how,” the report states.

Re-evaluate fee structures

The way people pay for services has radically evolved in recent years. Meanwhile, there hasn’t been a significant shift in wealth management, with most advisors still focused on asset-based fees.

However, some clients want options. Particularly for emerging clients with fewer assets, pre-existing pricing models don’t always make sense.

Financial upstarts have been offering monthly or annual flat fees, and in some cases subscriptions, to offer advice and financial guidance.

And advisors are increasingly interested in exploring pricing alternatives, according to Dunn, who says she is asked regularly whether younger clients are interested in other models.

“That's probably the most frequent question I get from financial advisors,” Dunn says.

Advisors should review their fee models and consider offering different levels of service at different price points, according to Dunn. Junior members of the team may also be able to onboard the younger clients and serve those who have simpler needs.

Build trust to alleviate market skepticism

While baby boomers entered the market during a burgeoning economy, many younger investors have the Great Recession and market swings from the coronavirus pandemic on their minds.

Advisors could help alleviate market skepticism by educating younger clients on investing fundamentals and by offering financial planning bootcamps in order to dispel fears about investing, according to T. Rowe Price.