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Practice Management

Changing the business model for younger clients starts with innovative technology and digital solutions combined with holistic, unbiased, guided advice.

This Practice Management article is intended for financial advisors only (registered representatives of broker/dealers or associated persons of Registered Investment Advisors).
 

The net worth of the millennial generation is projected to increase, from $4 trillion in 2015 to $20 trillion by 2030. But according to Jefferson National’s 2016 Advisor Authority, a comprehensive survey of 1,400 RIAs, fee-based advisors, and individual investors, nearly half of this generation does not work with an advisor to manage their finances.

The door, then, is open for advisors to engage with this emerging market of untapped clients who are starting their careers—and starting to build more wealth.

Armed with research and well informed, today’s young investors—particularly millennials—are demanding complete transparency and holistic wealth management, and they want it to be built upon digital solutions that are combined with guided advice. Those of this younger generation are already thinking beyond their immediate wants and needs, and are sharply focused on setting and meeting their long-term investing goals.

While two of their top three financial concerns today include financing large expenses, such as vehicles and financing children’s education, saving enough for retirement is a very close third.

Take Note of This Trend
Year over year, advisors say the pursuit of profitability is their single most important practice management issue—and the push for new clients remains the top driver. The most successful advisors are a step ahead by focusing on this next generation of younger investors. High-earning advisors with personal incomes of $500,000 or more say that millennials are their primary target. All advisors should take note.

Just as every company in the financial services industry has become fixated on technology to drive greater growth—and the most successful advisors have become tech obsessed to enhance efficiencies and achieve greater scale—millennial investors recognize technology can give their advisors a competitive edge.

Millennials are twice as likely as Gen X and baby-boomer investors to have confidence that robo advisors and other digital advisory solutions can provide proper management and protection for portfolios in volatile markets.

Even though 51% of millennial investors who work with a financial professional prefer their advisor to provide a low-touch approach to overall engagement, these digital natives still say their preferred form of communication with their advisor is face to face. This surpasses phone calls, and all other digital channels, such as e-mails, text messages, video chat, and social media. For millennials, the human touch still wins, hands down.

Means to an End
Millennials place great importance on advisors’ use of technology, such as enhancements to website or client portal, robust cyber security, and the use of mobile technology. Just as these digital natives and their symbiotic relationship with technology continues to change the way financial advice is consumed, they also will continue to influence further changes in the way this advice is distributed.

But the success of advisors and the future of financial advice are not solely reliant on innovative technology. It is the means to an end.

According to Advisor Authority, millennials say that when choosing an advisor, experience matters, and they place value on holistic planning and expect a true fiduciary standard that is completely transparent and in their best interest. This next generation has made it clear that digital solutions serve a purpose—but nothing can replace the value of holistic, unbiased, guided advice.

To build a foundation for the future of your practice, look to change your current business model into a mutually beneficial partnership with your millennial clients. Start with the primary change drivers: innovative technology and digital solutions combined with holistic, unbiased, guided advice.

By starting now and providing millennials with the right services they need at every stage of stage of their financial life, today and in the future, you can help them capture their fair share of the generation’s projected $20 trillion in net worth—and your firm can retain a highly profitable client for life.

Download the Advisor Authority Special Report: Generational Data Book at www.jeffnat.com/aa-nextgendata.

—by Mitchell H. Caplan
Mitchell H. Caplan is CEO of Jefferson National.

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