Next gen clients are online

By Philip Porado | October 28, 2010 | Last updated on October 28, 2010
3 min read

In our circles, the subject of where the next generation of advisors will come from is discussed quite frequently.

What’s less talked about is where the next generation of clients will come from. For the past three decades, advisors have been busy with baby boomers. These aggressive asset accumulators make great clients. They have money, no time to manage it, and a willingness to delegate financial planning to the professionals.

In short, they’ve been worth your time.

The harsh reality, though, is the generations following the baby boom rest significantly lower on the wage curve—a bad place to be in the face of inflated housing prices and increased parental longevity that will prevent them from inheriting for many years to come. Members of this emerging client base will also need help with debt management; not because they’re spendthrifts, but because everything costs too much.

The jokes about 40 being the new 30 are coming home to roost in ways that significantly impact what clients in generations X and Y will need, and when. In addition to having low asset bases, they’ve delayed marriage and children, and so lack some of the life-stage or tax complexity issues that make full-blown financial planning necessary.

So, how can you make sure they’ll someday be worth your time? Simple: encourage them to trade online. While that sounds counterintuitive, it’s not. Generations X and Y are tech-savvy and have strong independent streaks. They like doing their own research, and enjoy making transactions online at 2 a.m. in their pyjamas. Why not push them towards a ready-made asset accumulation vehicle?

To better understand these age groups, take a look at their spending habits. When surveyed about money, people under 45 consistently report feeling unable to save, yet display an uncanny ability to find room in their budgets for important purchases. It then becomes your job to frame the buying of shares in a nice balanced fund, or a few key stocks, in that light.

The tougher problem for advisors, going forward, will be how to connect with this emerging client base. People in generations X and Y show resistance to both traditional and online marketing approaches. They flip past the ads, and have spam filters to squash e-mails long before they reach the inbox.

You can’t push messages to these people. They’re self-educating. So you need to get them to pull what you create and help them find you by establishing a presence in cyberspace via blogs and other social networking tools (a marketing reality that calls for modifications in how advisor communications are reviewed by compliance).

For this emerging investor base, the discovery of your online presence becomes the de facto beginning of an advisor-client relationship. In the first years of that informal connection, they’ll plumb your expertise on how they should deploy their capital and learn to view you as a trusted intellectual resource.

Then, when their lives get complicated and they have some assets, you’ll be there to take their financial dreams to the next level.

Philip Porado