MortgagesFeb 22 2018

Advising the next generation of clients

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Advising the next generation of clients

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.

“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.

“I find clients are often very receptive to this offer where they themselves have seen the benefits of advice over the longer term.”

However, he cautions advisers: “These actions are unlikely to be profitable immediately, but that is not the point; it is about building a relationship with the next generation.”

This is one way of keeping advice in the family.

Savings bug

Ms Connolly suggests another crucial point at which advisers can introduce themselves to the next generation of a family is when they are discussing the gifting of wealth with a client.

“This also helps to cover the cost of time with the adviser, as the top generation are likely to have sufficient wealth to afford the fees well qualified advisers attract,” she says.

The advantage for the adviser in engaging with other members within a client’s family is that the parents can help to convey the feeling of satisfaction from saving for a specific purpose.

That is according to Frazer Wilson, senior consultant at Thomas Miller Investment, who explains parents can help to encourage their children to catch the “savings bug”.

Many millennials may not have parents who have themselves received financial advice, or who do not live anywhere near their parents’ adviser.

In this instance, the job for advisers is a bit more of a challenge as they do not already have an existing relationship with them.

But engaging millennials at the point at which they need the advice most, such as applying for a mortgage for a first-time property purchase, could provide an opportunity for advisers to open up the conversation to consider other areas of financial planning, including protection and retirement.

Initial discussion

What are the financial areas of concern that advisers should be discussing with millennial clients once they have initiated a meeting?

The first foray into home ownership is likely to come high up the list of priorities. Even if the millennial client does not have enough saved for a deposit, this is where the adviser can prove their worth.

For younger generations, getting on the property ladder is often the most pressing thing, says Colin Dyer, 1825’s national advice manager.

“But they should also be thinking about building up their life savings, particularly for the time in the future when they want to stop working and do other things,” he adds.

Mr Bashorun says points of discussion at an initial meeting will be entirely dependent on the individual needs of the client.

“However, typical needs might involve juggling the repayment of debt with saving for the future, perhaps for a house deposit.

“Their familiarity with technology also means they are not looking to engage with financial services in ways which previous generations did,” he explains.

This may dictate which products or providers the adviser recommends for them.

“A sensible review of where your income goes should be carried out annually,” Mr Wilson acknowledges, “and the use of technology will help to keep the younger generation engaged in the benefits of planning for their futures.

“Spending less than you earn is always a simple, but powerful, starting point.”

He urges millennial clients to think of it in these terms: “Think of the time and effort put into planning a holiday or a change of property. 

“The same, if not more, effort needs to go into building assets to help with the future.”

eleanor.duncan@ft.com