SAN DIEGO -- As the industry undergoes a multi-trillion dollar wealth transfer, it's time for planners to shift their focus toward the next generation.

Change will be here sooner than you might think, said TD Ameritrade Director of Financial Planning Nathan Harness in a panel on millennials at IMCA’s annual conference. This generation, born between the early 1980s and early 2000s, is poised to make up approximately 44% of the American workplace, Harness says.

Millennials are poised to make up approximately 44% of the workforce, said TD Ameritrade Director of Financial Planning Nathan Harness in a panel of millennials at IMCA's annual conference.

"If you think millennials aren't the economy...this is our economy," affirmed Harness, who is also an associate professor at Texas A&M University's financial planning program.

There are two crucial ways planners need to invest in millennials: as both prospective clients and future advisors. And while planners spend plenty of time focusing on diversifying client portfolios, they don't spend enough time on diversifying their client base to reflect changing demographics, Harness argues.

"We talk about diversification all the time, but not when it comes to homogeneity in our own space," Harness said.

BUILDING TRUST
Generally, millennials are less trusting than previous generations. Only 19% believe that most people are trustworthy, according to Pew Research Center data cited by Harness. That number doubles for baby boomers.

The lack of trust stems from a number of factors, Harness notes. More than three quarters of millennials graduate with student debt. In 2014, almost 40% of unemployed Americans were millennials.

Waning confidence in the economic landscape is also reflected in how millennials are choosing to invest — over half of millennial assets are held in cash.

"However, millennials do trust their parents and friends when it comes to financial advice," Harness noted. While 41% of millennials trust their parents, only 14% trust advisors, according to UBS Investor Watch data.

So how can advisors reel in these clients? Harness suggests they take inventory of current client bases to see if they can broaden their reach. "Who are your clients?" he asked the audience. "Mom and Dad."

Attract clients' children "by attaching your brand to something that excites them," Harness said. Revamp websites and social media presences so that younger clients, who are native technology users, have a better platforms to engage with the planning process.

This can have far-reaching benefits. Over 80% of clients are willing to use technology-based media with their advisors, according to PriceMetrix data. Only 45% of advisors are willing.

Allowing millennial clients to participate in the management of their finances is key. "The industry is shifting in focus from access to advice. The value-add will be in the advice, not the access," Harness said. "These clients want to be a part of the process."

Harness also says it's important for advisors to think about how they speak with these younger clients. "Be a teacher, not a preacher," he said. It is better to engage using emotive narratives rather than raw statistics, he argued. "Be storytellers … Clients will relate to impacts much better than numbers," he says.

TRAINING THE NEXT GENERATION
Just 9% of millennials entering the workforce aspire to work in financial services, Harness says, signaling a disconnect with how the industry appeals to the next generation of planners.

It's important for advisors to get the word out on what the planning profession can offer young people, Harness said.

The benefits are palpable, he added. Between 2012 and 2014, firms that employed NextGen advisors grew at almost double the rate as those that did not, according to TD Ameritrade data.

Additionally, bringing in new blood is crucial for advisors struggling to pull together a succession plan. "There is tangible value to adding a young advisor to your team," Harness said. "Young adults have tenacity, an understanding of technology and time."

Consistency with your clients will also ultimately trickle down to your younger staff, he added.

"The trust of your clients is something that can be franchised."

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Maddy Perkins

Maddy Perkins

Maddy Perkins is the Assistant Managing Editor for Financial Planning, Bank Investment Consultant and On Wall Street.