Rethinking financial planning for Millennials

In this opinion piece for Financial Standard magazine, Lifespan CEO Eugene Ardino says many financial advisers are doing themselves a disservice by steering clear of younger clients in the belief that they don’t generally have much to invest and are too young to be interested in retirement planning.

Advice for Millennials

Many financial advisers steer clear of younger clients in the belief that they don’t generally have much to invest and are too young to be interested in retirement planning.

However, advisers who fail to service them are doing themselves a disadvantage. The massive potential of this group simply cannot be ignored. The intergenerational transfer of wealth from Australian Baby Boomers to their children over the next 10 to 20 years has been estimated at up to $3 trillion.

And despite what some planners might think, there is a high earning Millennial cohort; the so-called HENRYs – high earners, not rich yet.

Some planners, many of them Millennials themselves, have structured their entire businesses around engaging this group. The strategy relies on the expectation that if these young clients are serviced in the way they want to be serviced, they will remain loyal to their planner until they hit their peak earning and investing years and beyond.

Much has been said, both positive and negative, about the defining characteristics of Millennials; those people born between 1981 and 1996. We’ve all heard the stereotypes about how they are narcissistic, don’t like to pay much for things and are obsessed with fame, self-promotion and avocado on toast.

However, more positive traits attributed to this group include:

  • Tech savviness
  • Expert multi-taskers
  • Socially conscious
  • Information seekers
  • Sceptical about ‘big business’ – they appreciate ethics and transparency in marketing and don’t respond well to the ‘hard sell’.

So, what does all this mean for financial planners seeking to engage Millennials? One of Lifespan’s authorised representatives, Arkadiusz Bryl, founder of Real Knowledge, Diverse Solutions, is an expert at reaching younger clients through digital marketing. Arkadiusz regularly advises other planners on digital marketing and how to engage younger clients. He believes many financial planners overthink their approach to servicing younger clients.

“Ultimately, they want exactly what Generation X and Baby Boomer clients want, which is a secure financial future. They just want to go about it a different way. They might not want ongoing advice yet, but they do want help when major events occur in their lives such as getting married, having children and getting a promotion.

“Millennial’s do, however, seek complete transparency. In an age when you can find almost anything on the internet, they appreciate it when you lay everything out on the table and share or even involve them in the advice process.

“I think of the traditional advice model like a taxi. You don’t really know how the meter works, you don’t know what route they’ll take, but it’ll get you to the place you need to be. Then there’s Uber. Prior to booking, you know exactly who’s picking you up, exactly how much it’s going to cost, what their service is like and the route is laid out. That’s exactly how financial advice should be and that’s the approach we take,” he said.

As a licensee, I agree with Arkadiusz that traditional methods of engagement often do not resonate well with Millennials and a different approach is required. Statistics show that more often than not, when an existing client’s wealth is transferred through a life event, the servicing adviser loses relevance and the beneficiary of the outcome will seek advice from somebody more attuned to their way of doing things.

Millennials are taking a greater interest in all things financial. They want to be well informed and are not afraid to seek assistance – but the engagement piece for most older advisers remains a challenge.

Where many firms get it wrong is believing that the service model needs to cost a lot of money. One of the great things about Millennials is that, while they want guidance and some engagement, they are prepared to do some of the work themselves. Therefore, focus engagement on general advice and education and then send them off to do much of the work themselves. This, combined with the broader adoption of many modern technologies, means that the cost per client can come down significantly. What Millennials don’t want is to be told by an adviser, ‘come back when you have $200,000’. I guarantee you’ll never see them again if you take that approach.

It can also be a prudent strategy to engage and advise the Millennial beneficiaries of your larger clients at a loss and consider it an investment in increasing the probability of retaining the client once the intergenerational wealth transfer occurs. Many successful advisers are already doing this.

A fresh approach to client engagement

The traditional approach to engaging clients just doesn’t work with many Millennials. Many don’t respond well to being told they should have particular investments or insurances. They want to be educated and make at least some of the decisions themselves. With that in mind, Arkadiusz begins his initial client meetings with a visual fact find.

It is a ‘no pitch, no sell’ proposition in which the prospective client is taken through a series of simple steps which shed light on their actual financial position. The simplicity of the process is also a pleasing contrast to the information overload that is so prevalent in modern society.

In April 2018, Arkadiusz hosted an innovative event for 120 people called ‘How to Smash Goals, Not Avocados,’ where he took them on a visual journey of their goals, needs and objectives.

“I teamed up with an illustrator, and we provided everyone with an empty ‘visual fact find’. We provided no direct advice, but 87 attendees left reviews that they had learnt more about their financial life in two hours than in their whole lives. Which made me think, why can’t I do this on an even bigger scale?

“There’s no middle man anymore. You can grab your phone, record a video or write a blog and post it to whoever you want, wherever you want, for a few dollars. You’d be surprised how far ‘good’ content – where you’re actually providing real value – will take you without having to spend much at all. The only thing I see most advisers giving away is complimentary initial meetings.

“[If you can] educate the masses and solve a simple problem for your network of contacts without a fee, trust me, when they have a bigger problem, they’ll come to you. They will appreciate the effort you have put in, [and will be more likely to] become your client on the basis of you being able to service their goals, needs and objectives,” he said.

The propensity for Millennials to educate themselves also makes content production crucial for advisers targeting this group. This might not be everyone’s cup of tea as it requires a significant time commitment. Arkadiusz has also developed free ‘lunch and learn’ events in which he educates potential clients about developing a financial plan.

Millennials respond more positively to word-of-mouth endorsements than traditional advertising, therefore, social media is an ideal channel through which to engage them. Mass marketing through social media is also an effective way to keep costs down. For example, Arkadiusz posts videos to his audience of more than 1,000 Instagram followers every day, often on weekends, and hosts a free group chat event online every week.

As I’ve mentioned, this business strategy would not suit most advisers, particularly those with no grasp of digital marketing.

Arkadiusz has few clients on retainer – he works with most of them on a transactional basis. His model relies on scale for its success. It also requires a constant flow of new content for social media feeds.

Critics might say that he is giving away too much of his time and intellectual property for free. But his response would be that by keeping them happy now, he is building a base of loyal clients who will be with him throughout their peak earning years and beyond. The strategy has its challenges for a start-up business with limited cashflow but would function as a worthwhile add-on for more mature businesses looking to invest in the future.