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Financial Advisors for Young Adults: 4 Insights for Serving the New Generation of Clients

Date: September 20, 2023

Over the next few decades, an estimated $68 trillion in wealth is going to transfer from baby boomers to their children and grandchildren, representing the largest wealth transfer in history. So, whether you like it or not, it’s time to start thinking about how your practice needs to change to meet the needs of the next generation. 

Not only do financial advisors for young adults have to consider the different requirements they have at this life stage, they also have to factor in cultural shifts that have made the goals, expectations, and needs of younger generations different from their baby boomer parents and grandparents. Here are some of the most important ways you might start future-proofing your practice and better serve young adults

4 Ways Financial Advisors for Young Adults Can Prepare Their Practice for The Next Generation

Offer Holistic Financial Services

Regardless of expectations or trends, young adults are at a stage of life where they need holistic advice across just about every area, including financial planning, tax preparation, and debt planning on top of portfolio management. 

Not only are young adults more likely to be grappling with student loans, they’re also more likely to switch jobs, be self-employed, and delay or skip milestones like marriage or having children. This means they’ll likely need help navigating unique tax situations and wealth management strategies that are very different from older clients.

Plus, these first decades of adulthood are also when every individual, regardless of generation or economic trends, is dealing with the most changes and has the greatest need for sound financial advice. They’re buying their first home, contributing to their first 401k, figuring out how much to save for their children’s college, inheriting wealth from their parents, getting married, and, sometimes, getting divorced. 

All of this requires a lot more than just portfolio management. So if you want to cater to younger clients, look at broadening your service offerings rather than niching down. Doing so has the added benefit of boosting revenue by adding the ability to cross-sell more of your products and services. 

If adding more services doesn’t make sense for you, be ready with a list of experts you can refer the client to for different needs, including lawyers, CPAs, and tax preparers. Either way, the goal is to become the trusted resource young adults go to first to navigate all the complex financial questions they’re confronting for the first time. 

Incorporate Digital Technology into Your Practice

The robo-advisor takeover is largely exaggerated since most millennial and Gen Z adults say they prefer to receive professional financial advice from actual humans. In one Accenture survey, just 17% of respondents said they want a completely digital means of receiving financial advice. The rest know that algorithms can’t beat the personal touch of a human financial advisor.

However, that doesn’t mean clients don’t want any digital tools. In fact, younger generations are increasingly taking a more active role in their wealth management and expect to have digital tools that help them do so. 

In other words, making your practice more attractive to millennial and Gen Z clients means blending in digital tools in a way that gives them the best of both worlds: self-service when they want it and personal advice when they need it. The exact tech mix you use will vary, but it may include things like:

  • Digital scheduling tools that allow clients to schedule meetings on their own time.
  • A financial dashboard that clients can access whenever they want to check in on investments, savings goals, and other key data.
  • Financial planning calculators like debt payoff or investment savings calculators that clients can access to explore alternative goals or strategies
  • Virtual meeting options to offer clients more flexibility in when and how they meet with you

Prepare for More Customized Retirement Planning Needs

Millennial and Gen Z adults have different attitudes toward retirement than their parents and grandparents. According to a BlackRock survey, they’re putting more of their paychecks toward retirement savings than previous generations and hoping to retire sooner than Baby Boomers. However, only about half of young adults are on track to meet their retirement savings goals. 

Beyond evolving goals and needs, the income and financial tools young adults are using to save for that retirement is changing. For one, younger workers change jobs more often, a trend that tends to lead to better salaries but can make managing their 401ks more complicated, especially if they switch jobs before they were fully vested. About half are also earning income either partially or fully through freelance or gig work, which come with their own retirement planning challenges and opportunities. 

This means that retirement planning might not be as straightforward for your younger clients as it is for older clients. So you’ll need to be ready to create more unique retirement savings plans that are custom-fitted to each client. 

Consider Changing Your Fee Structure

One reason the financial advisory industry has been so slow to transition to younger clients is that they typically haven’t accumulated enough wealth yet to meet advisor minimums. However, these next generations are more open to professional financial advice and are willing to pay for it. Plus, as mentioned earlier, they also often have more complex or unique circumstances and needs that the generic advice found online or via robo-advisors can’t really account for. 

To provide your expertise and services to young adults when they need it most while still keeping your bottom line in mind, you might need to shift away from the percentage of the AUM fee model. Fortunately, younger generations are open to different fee models, including a flat fee for service, an hourly rate, or a subscription model. You might also consider a fee that transitions into a percentage of AUM. For example, set a $5,000 per year minimum fee that becomes 1% of AUM when the client’s assets reach $500,000.

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