Advising A Millennial Requires A Different Approach – Financial Advisor Magazine

It’s an unfortunate development, but there’s no denying that many Americans are financially illiterate. Students in our high schools are taught algebra and trigonometry but nothing about the magic of compounding, how to balance a checkbook or why it’s important to budget. That people lack these basic financial skills shows why they need sound financial advice more than ever, especially when we’re talking about young adults who have graduated from college with tens of thousands of dollars of debt but haven’t had the opportunity to learn how to manage money.

One of the big differences I’ve seen between millennials and our average clients, who tend to be in their 50s or older, is that they lack a fundamental understanding about what they need from financial planning or, in many cases, don’t know that they even need help at all. Often, when new clients come to a firm like ours they have been in the workforce for quite a few years, have participated in an employer-sponsored plan and have done some investing on their own. They are at a point where retirement no longer seems so far off, and they want to make sure they are prepared. We love to work with clients like that because they really need our help, but it would be more practical to start the relationships when they’re younger and earlier in their earning years.

The sooner an individual can start thinking about financial planning, saving and investing, the better off they will be in the long run. The goals they set in their 20s are likely going to change over the next few decades. That’s OK. A financial plan should be a living and breathing document that adapts to changes in one’s life and lifestyle. The important thing is to help young clients lay out their short, intermediate and long-term goals and then revisit them regularly to update them as needed.

But before we can help these young adults on the path to financial security and success, we must first reach them. As that old adage says, you have to go fishing where the fish are. The young person not tuned in to social media is a true outlier these days, so we’ve bolstered our efforts to use this medium to attract younger clients with content relevant to their needs.

Social media and our network of connections have generated leads and new clients. These contacts may not have been looking for an advisor, but when they see appealing, pertinent content, it gives them a point of entry.

In our posts, we address issues that are important to millennials and other young adults, such as advice on buying a home or on changing jobs or careers. Our goal, which should be the same for any advisor looking to reach this demographic, is to show our expertise in financial planning and investment management, as well as to provide good old-fashioned money advice. Like any successful advisory practice, we have a base of clients who have been with us for decades, but it’s crucial that we connect with new audiences to demonstrate that we are not just here to work with older generations of clients preparing for retirement.

Also, if you’re trying to cultivate younger clients, your firm should have younger advisors, people who are going through many of the same financial stages. Hiring professionals from a younger demographic has helped us attract more millennials and Gen Z because these clients know they are receiving information from somebody who has experienced, or is about to experience, the same issues. I think that lends some trust, credibility and a level of comfort because they know that we are giving them advice, not just strategies.

For our firm’s own future, we also take on clients early in their careers who haven’t accumulated substantial assets yet. While millennials may not be the most lucrative demographic right now, we see working with these individuals on planning today as an investment in the future, both theirs and ours.

Over the next couple of decades there will be a tremendous wealth transfer in this country. Cerulli Associates estimates that some $68 trillion in wealth will change hands in the U.S. by 2042, with much of it being passed on to millennials and Gen Z.

The millennials we work with are often the adult children of current clients. Not only do they stand to take on a lot of inherited wealth, but many of these second-generation clients are independently successful in their own right. By working with them early in their careers we can help them start planning for the future immediately and build a relationship that deepens over time.

Advisors looking to cultivate clients in this demographic need to be willing to put in the time to give them a basic financial education. Then over time, as they become more knowledgeable, you can introduce more complex planning strategies and recommend more sophisticated solutions.

But the biggest challenge in attracting the next generation of clients is getting over the hump of their preconceived notions of what a financial advisor is, what we do and whom we do it for.

Jeffrey P. Mattonelli is a financial advisor with Van Leeuwen & Company (VLC) in Princeton, N.J., serving VLC clients and select clients in its Rembrandt Society, helping them plan their life visions and investment needs.