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Six ways to convince millennials they need a financial advisor

Millennials are projected to be the highest net worth group of clients. Here are our tips on how to close the next generation of wealth.

By Runik Mehrotra

Millennials are set to be on the receiving end of the largest wealth transfer in history. Although $30 trillion is on its way to millennials, too many of us are still stuck in the cliche of the broke millennial. Financial advisors and millennials have much to offer each other — provided financial advisors can make their case. How many millennial sales leads are you receiving? Chances are, not enough. 

Not every millennial is thinking about professional financial advice, and many believe they can and should handle all their finances themselves. So they do what they’ve always done: They go online, they research, they invest in passive products like exchange-traded funds (ETFs) and robo-advisors, and they skip the hassle of finding an advisor. Why? Simply put, the average millennial faces challenges their parents and even older siblings did not.

To begin with, millennials may well be paying down tens of thousands of dollars in student loans, and throughout their career they’ve faced challenging employment markets and stagnant wages. They remember the early 2000s internet bubble, they graduated from school or began their careers in the era of the 2008 market crash, they muddled through the Great Recession, and now they’re anticipating a post-coronavirus depression. It’s no wonder that millennials are skeptical of investing their limited savings into stocks and bonds.

But the future isn’t all grim: millennials are set to outnumber baby boomers and to become the largest adult segment across the United States. And as they grow older and accept a larger role in the economy, their wealth will grow too. In the 2020s, millennials will make financial decisions that affect the remainder of their lives. They will pay down student debt, take out their first mortgages, and begin growing retirement funds. Despite their urgent financial needs, relatively few millennials have sought help from financial advisors. 

For millennials, certified financial advisors can help them effectively tackle risk and build safety nets for their short-term and long-term goals. Financial advisors can build long-lasting and mutually beneficial relationships with new millennial clients, but an entrance into this underserved market requires ample understanding of millennial habits, beliefs, and priorities. Here’s our take on how you can guide millennials to invest in a financial advisor to meet their goals.

Be relatable: Know what they’re looking for

When connecting with millennials, it’s important you gauge where they’re coming from and understand them first. First, know what they don’t want: As survivors of the Great Recession, they’re not looking for a salesperson pitching them incomprehensible complex financial products. They’re understandably suspicious, and many will have read about advisors pushing products against their clients’ interests. 

Be up-front. Bring hidden fees into the open, clearly explain any sales commission charges, and describe any lock-in periods they may face.

>> Watch our on-demand webinar for more insights on capturing next-generation wealth.

Better transparency = More millennial clients

A Deloitte study found that transparency in fee structures and pricing plays a critical role when it comes to overcoming the negative perception that millennials have of financial advisors. If your fee structure is complex, confusing, or opaque, you won’t acquire — or keep — many millennial clients.

Prospective clients will ask: “What’s the total cost of this fund?” or “What are you paid if I invest in this fund?” Make sure you have simple, straightforward, and succinct answers prepared. Your clients need to trust that you’re working for them and that their best interests are always at the forefront of your mind.

Feed in ample flexibility to personalize their investment experience

No two clients are alike, and younger clients may insist that no two porfolios should be identical either. Demonstrating your ability to personalize portfolios will make a difference to discerning millennial clients, who may, for example, object to ownership of environmentally destructive assets. Environmental, Social, and Governance (ESG) investing is growing in popularity. An EY study found a full 84% of millennials thought it should play a role in their financial decisions. Showing that you can accommodate particular needs and requests is always a good strategy.

Using a platform that builds personalized portfolios or doing your research on companies that support sustainable, environmental and social goals to present them with relevant options will add significant value when you pitch to a potential client. 

Pitch the long-term investment relationship‍

Millennials aren’t always good at staying in place: They switch jobs more than previous generations. But that doesn’t mean they’re opposed to long-term financial relationships; many millennials want the stability that a financial advisor represents. They know that their twenties and thirties are essential decades for ensuring a prosperous future. They want partners they can rely on for the years and decades to come. 

When you first meet potential clients, ask them questions that will help you understand the future they would like to build for themselves. Partner with them to create a plan that will help them fulfill their dreams. 

Leverage technology

Millennials expect technology to work well, to work quickly, and to work around the clock. They’ve installed Google Nest or Alexa hubs in their homes; they’re accustomed to one-click purchases and seamless digital experiences. So if they learn you’re relying on technology nearly as old as they are, if they see you’re still running off a manually updated spreadsheet, they’re not going to be impressed, and they’ll take their business elsewhere.

Millennials embrace technology in every facet of their lives, and investment is no different. They’re not put off by AI-powered investment management platforms, by mobile apps, or by real-time updates. In fact, they expect all of these things. 

The millennial-friendly financial advisor needs to be tech-savvy. Tapping into modern technology is critical to providing better client service, streamlining investment data, and providing efficient financial advice based on the information that is available to you. Client and advisor alike will save time and earn money.‍

Show why they need unbiased assistance

It can be hard for anyone to disentangle money and emotion. Millennials have taken up trading with apps like Robinhood, but one app does not a coherent retirement plan make. For one thing, the very structure of a mobile app encourages overmanagement and bad decision-making. If you’re not a financial professional, but you spend every lunch break staring at your phone, you’ll make spur-of-the-moment emotional decisions. You’ll hold one asset too long and sell another too soon, and the immediacy of the app experience means you probably won’t have done the necessary research.

A financial advisor is invested in client success, but they’re trained to avoid the irrational decisions that the market can inspire. Don’t tell potential clients they need to delete their apps; do show them why apps alone aren’t enough.

Despite all the adversity they’ve encountered, millennials have a bright financial future ahead. For advisors, they’re the wave of the future; failing to understand them could damage your long-term prospects. Thankfully, attracting millennial clients isn’t as difficult as some have claimed. Just remember who they are, consider what they’ve been through, consider their needs, and explain your value proposition. Like any other clients, millennials want to succeed. And, as ever, you have the tools to make sure they do.

Runik Mehrotra is the chief investment officer and co-founder of Vise

May 10, 2020