Advising the next generation of clients

This article is part of
Guide to generational financial planning

Advising the next generation of clients

Capturing the next generation of clients is going to be important for financial planners if they want to ensure the future of their own business.

But it is also necessary to close the advice gap which has opened up in the UK in recent years.

David Marlow, chief executive of The Nottingham Building Society, observes there is huge demand for advice and support in managing money across all age ranges, but points out that nearly half of adults find it hard to access the advice they need.

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“It applies across all age groups – our research, however, shows it is younger customers who need access to advice and have struggled more than older savers,” he says.

The research by Nottingham Building Society reveals one of the biggest barriers to sourcing advice is not knowing where to start.

Mr Marlow notes: “[Of those surveyed] 27 per cent said they were unsure how to find an adviser, while 24 per cent said they had to wait to see an adviser as they wanted face-to-face support. Cost was an issue for 35 per cent who said charges were too high."

He explains: "It is younger savers and investors who need the support with their finances the most, The Nottingham research shows. Nearly one in three (30 per cent of) under-35s believe they are not saving enough because of a lack of advice, compared with just 12 per cent of the over-55s questioned."

Research carried out by BlackRock in its UK Investor Pulse survey last year found the following:

  • 14 per cent of millennials currently use an adviser - of these, 23 per cent use IFAs, 40 per cent use a high street bank adviser, and 24 per cent use a private bank, wealth or asset manager.
  • 18 per cent of 65-74 year olds currently use an adviser - of these, 64 per cent use IFAs, with 16 per cent using a high street bank, and 19 per cent using a private bank, wealth or asset manager.

Taking steps to engage

So how can advisers engage with millennials, generally defined as those born between the early 1980s and early 1990s, who are actively seeking advice but do not know where to find it?

Jade Connolly admits the demographic of financial advisers can be a barrier. “Encouraging the younger generation to talk about financial planning is often difficult through traditional methods,” she points out.

“The average age of advisers is 50.9 years and, therefore, while age isn’t always a barrier to a good relationship, this does present a problem when trying to engage a millennial to meet with a financial adviser.

“Also, the traditional methods of meeting new clients face-to-face in a world of apps and social media, isn’t appealing to the younger generation.”

Ms Connolly believes cost can act as a deterrent too.

“For the adviser, there is also an issue with charging appropriately for their time when a younger investor is likely to have fewer surplus funds to cover the cost of advice,” she adds.

The answer may come in the form of an adviser firm’s existing client base.

“The easiest way to ensure a pipeline of younger clients is to engage with the children of existing clients,” suggests Simon Bashorun, financial planning team leader at Investec Wealth & Investment.

“This may be initially through their parents, perhaps in the form of Junior Isas, but may evolve to include basic financial education sessions once they reach a certain age.