3 Ways Financial Advisors Can Win Generation X & Y Clients - Pocket Risk

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3 Ways Financial Advisors Can Win Generation X & Y Clients

Let’s get personal. I was previously an employee at Facebook and just like many other Silicon Valley employees I was offered equity in the business as part of my compensation. When the company IPO’d I suddenly had money to invest, along with many of my colleagues. I and many of my colleagues would qualify as great generation Y clients.

At the time there were endless conversations about what to do with this money. One of the first was whether to get a financial advisor, use a web-based investment service like Wealthfront or invest it ourselves.

Advisors were treated with deep suspicion. Numerous employees had already been contacted by big-name private wealth management firms via LinkedIn which left them feeling like a prize to be won rather than a client to be cared for. You can see this mentality in this New York Times article. Most people didn’t know the difference between a RIA, Broker-Dealer, Fee-only or Commission based advisor. So what do well educated people do when they are stuck? They ask a friend and read a book!

The most commonly referred book is Burton Malkiel’s “Random Walk Down Wall Street”. After reading this book everyone becomes deeply suspicious of active investing and fees. This naturally leads them to Modern Portfolio Theory, Vanguard and that unforgettable quote by John Bogle – “In investing, you get what you don’t pay for”.

I’ve critiqued Modern Portfolio Theory before, so I won’t go into it now but suffice to say, if advisors are going to succeed with Generation X & Y clients they need to short-circuit this fallacy that successful investing is simply about diversification and low fees. I’ll tell you what I think successful investing is about a little bit later.

So what about the web-based investment firms like Wealthfront? Don’t they bring the promise of an advisor with very low fees? To some extent yes but many in Generation X & Y are still of the opinion they can do the same thing in an Excel Spreadsheet minus the benefits of tax loss harvesting (although Michael Kitces has debunked these benefits somewhat).

So what’s an advisor to do? Here are three ways advisors can win Generation X & Y clients.

1. Short Circuit The Fallacy That Successful Investing Is Just About Diversification and Low Fees

Successful investing is about many things before diversification and fees. It involves planning and setting goals. It involves discipline. Spending less than you earn and staying the course. It involves education. Improving your financial IQ. When the next crash comes I like to wonder how many people will yank their money from the web-based investment managers because they had no plan, no discipline and no education. Here lies the unique selling point of advisors to Generation X & Y clients, their ability to act as a coach. To teach, to instruct, to challenge, to refuse. After all, investing is a means to an end right? And good advisors help make that clear.

2. Don’t Just Protect My Money, Make Me Money

When I speak to people in Generation Y they are very much in the accumulation phase. Once they know the basics of investing they want to learn how to make money not just park it into a mutual fund and stay the course. Increasingly they are turning to people like Todd Tresidder also known as the Financial Mentor to learn more about making money. I believe one of the most overlooked skills in our industry is the entrepreneurial skill of advisors. They have often set up their own businesses and become a success in their own right. Yet I see few advisors teaching entrepreneurial skills to their clients. An advisor who can help me increase my income not just protect a nest egg I have already built would be truly invaluable and unique.

3. Branding and Presentation

When I was growing up my mother said that I should always shine my shoes before I leave the house. I would be judged by their presentation. That was my mother’s generation, today we judge people by the quality of their website. It may seem small but it’s not. A bad brand and website turns people off and yet when I speak to advisors (every day) they often start our conversations by apologizing for the quality of their website. If it’s been on your to do list for a long time, get it done.

If there is one more thing I would add to the list it is marketing (which will be the subject of a much longer post to come soon). To conclude I sincerely believe advisors can capture Generation X & Y clients but they will have to significantly change the way they do business. The value of advisor to my generation is not in managing money it is in the coaching.

Image Credit – LinkedIn

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