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Time to value the millennial market

Time to value the millennial market

Millennials – the generation born between 1980 and 1999 – are a worthwhile focus for financial advisers.

Far too often we encounter the view that millennials have too few assets compared to older generations, cannot be served effectively or that millennial children who inherit money will flee an adviser’s practice. But on the contrary, any adviser seeking to increase the value of his or her practice must heed the world’s largest age cohort, which is 2.3 billion strong by population and arguably even larger by social and cultural influence. 

The millennial opportunity for financial advisers transcends the trillions of dollars this generation stands to inherit. Millennials increasingly set economic and social trends for all generations, influencing spending patterns, acting as primary introducers for new technologies, and presaging trends now advancing rapidly among older generations.

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Which age demographic is building new Facebook pages most rapidly? Answer: Not millennials, who signed up years ago. Older generations today are instead the fastest growing demographic. Advisers who want to connect with clients of any type increasingly need to understand trends which begin with the younger generation.

This age cohort, who are coming of age during the financial crisis, is risk-averse and sceptical toward Wall Street and financial professionals, having watched their parents lose homes or jobs. The oft-made observation that many millennials live at home, often cast in purely economic terms, is actually much deeper than economics. Millennials put off commitments such as marriage and homeownership, but they are also family oriented – surveys show they overwhelmingly intend to get married and raise children some day.  

The why for advisers seeking to build new relationships with this group can be summarised as follows: 

-    Millennials set trends. Some 74 per cent of millennials advise their parents on product recommendations frequently.  

-    Millennials can enhance the value of a practice. Advisers who want to increase the value of their practice have three ways to make the business more attractive to successors or acquirers: enhancing the product mix, increasing recurring revenues, or reducing the age of the book. 

-    Millennials can be courted in an efficient manner. They are often less costly to acquire and maintain as clients, since many prefer a lower-touch service model. In addition, surveys suggest that nearly two-thirds of high net-worth individuals under the age of 40 are willing to consolidate their wealth with a single provider. 

So how can the industry connect with millennials? We see a need for a two-step strategy. First: retain assets by building relationships with today’s clients, to impact revenues in the near term. Second, in parallel, set up a separate millennial client acquisition strategy, which will impact one’s practice years from now when millennials’ earnings power and wealth are more fully developed.

Offering ongoing financial education to heirs, for example, on handling sudden wealth, on environmental, social and governance investing, or life coaching – on college, real estate and related topics – are interesting ideas. Engaging clients at a social level when heirs are visiting is vital. So is including heirs in review meetings and communicating on their terms – lower-touch methods such as email newsletters or even texts are worth considering. Involving high net-worth family heirs in philanthropic/planned giving and developing a family mission statement can help get the children involved in a cause.