A New Wave of Wealth Management: How to work with younger generations

Wealth management is best left to the boomers, since only the older generations need to worry about their financial future, right?

Wrong. One could argue that wealth management is just as important, if not more so, for Generation X and Generation Y. The value placed on effective financial guidance is only growing stronger, as younger Americans are learning the importance of financial planning and retirement savings. Where once the majority of a person's money was earned earlier in life, a number of professionals are finding their footing later in their careers - thrusting wealth management into the spotlight.

The end result of this shift is more young professionals who need to know and learn about this important practice. For financial advisors, clients could soon start to change from boomers nearing retirement to up-and-coming college graduates with an interest in nurturing their assets. And, the guidance given to one demographic may not be the same for another.

Wealth shrinks for younger Americans
One of the biggest tools for any person looking to grow their wealth is time. Saving early - and taking part in the correct strategies - can make a significant difference when retirement becomes a reality. 

Time is now more important than ever, since Americans are having increased difficulties earning money earlier in life. According to the U.S. Census Bureau, the median net worth for American households is shrinking, especially for younger demographics. Between 2000 and 2011, adults between the ages of 35 and 44 saw net worth slip by 41.4 percent relative to those under the age of 35.

A recent survey conducted by the Urban Institute further illustrated this trend. Results found that Generation X and Y cultivated less wealth than their parents. Average wealth dropped by 7 percent from 1983 to 2010. This highlights the importance of financial planning, as a lack of wealth at a young age could contribute to a greater dependence on social programs and federal assistance later in life.

An advisor is worth the visit
Should younger Americans see a financial advisor? According to a number of experts, the answer is yes. Since wealth management - or, more importantly, a lack of wealth management - is so influential during the formative years of one's financial life, the involvement of a professional can make all the difference.

What is on the agenda for these meetings can vary, however, and the approach and attitude toward wealth management is often unique compared to older generations. Even so, it worth it for a financial advisor to reach out to a younger audience. 

In an article for The Wall Street Journal, Rich Hilow, a branch manager with New Hampshire-based LPL Financial, outlined several common obstacles advisors face when working with young professionals. 

According to Hilow, these can include, but aren't limited to:

• Smaller portfolios - Naturally, it is harder for young Americans to have accumulated the same amount of wealth as their older peers. A lack of capital to work with can turn off some advisors, but it is still important to help even the most cash-strapped budding investor.
• Impatience - Young professionals may not have the experience or education to understand the details of wealth management. When you begin your relationship, they may want to turn a small investment into a major return in a short period of time - and it is up to you to control their expectations.
• The Internet - Yes, even the Internet can be an obstacle. Generation Y in particular grew up online, and that will translate into their wealth management. Odds are they know and love - or at least have heard of - day trading, and the fast-paced investment world online, plus the instant results, can cloud better judgment in some cases.
• Time - Time is both a blessing and a curse for young professionals. They have the time to get their finances in order, but they are also a long way off from retirement. As a result, they may not take retirement planning seriously, or heed the advice you give them about the importance of long-term savings.

How to connect with a younger generation
Overcoming the obstacles is a vital part of advising younger Americans, but you may also have to alter your current strategy to get the best outcome. While wealth management - especially retirement planning - may not be on the minds of every person in their 20s and 30s, the demand for quality and effective financial advising is there.

In an article for LinkedIn, April Rudin, wealth marketing strategist with New York City-based The Rudin Group, detailed a number of the steps financial advisors can take to not only help their existing client base, but prepare for a new wave of younger professionals.

Some of those steps include:

   1. A self-assessment
   2. A different approach
   3. A better online persona

1. Self-assessment
The first step on your path to comprehensive advising services is a self-assessment. Rudin explained that tailoring your services to older and younger demographics may require a fresh take, so the best place to start is by looking at your existing product. Find areas where your services are already perfect for younger clients, and locate places where improvement is needed. Make a list of the items you want to change moving forward.

2. Different approach
Next, you can begin to alter your approach to the process. Rudin pointed out that baby boomers and Gen X and Y have different values. Consider shifting your style to reflect those preferences. For example, boomers can appreciate value and loyalty more compared to their younger counterparts. Gen Y likes to use the Internet and values transparency and honesty. 

3. Online persona
Since the Internet is so important, you will also need to upgrade your online persona. To start, simply Google yourself. What comes up? The answer may not be ideal. Try to utilize social media, both to provide value to clients and generate leads. If your social media presence is an accurate reflection of you as a professional, then you have a better chance of attracting a younger demographic.

Above all else, understand what young professionals bring to the table. They might not have the portfolio of your older clients, but they need the financial advice just the same.

To learn more on this topic, register for our Certified Wealth Strategist program or learn more about our other offerings at www.cannonfinancial.com.

Copyright ©2014 Cannon Financial Institute - All Rights Reserved

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Sources/Resources: 
http://www.census.gov/people/wealth/files/Wealth%20distribution%202000%20to%202011.pdf
http://www.urban.org/uploadedpdf/412766-lost-generations-wealth-building-among-young-americans.pdf
http://online.wsj.com/articles/SB10001424127887323415304578368703504611558
https://www.linkedin.com/pulse/article/20140804145608-28376123-wealth-gets-a-facelift-how-to-attract-and-engage-new-next-gen-wealth?trk=prof-post

Disclaimer: The materials and information contained herein are intended for educational purposes, to stimulate thought and discussion so as to provide the reader with useful ideas in the area of wealth management planning.  These materials and information do not constitute and should not be considered to be tax, accounting, investment, or legal advice regarding the use of any particular wealth management, estate planning, or other technique, device, or suggestion, nor any of the legal, accounting, tax, or other consequences associated with them. 
While the content herein is based upon information believed to be reliable, no representation or warranty is given as to its accuracy or completeness.  For this reason, the program of study should not be relied upon as such.  Although effort has been made to ensure the accuracy of these materials, you should verify independently all statements made in the materials before applying them to your particular fact pattern with a client.  You should also determine independently the legal, investment, accounting, tax, and other consequences of using any particular device, technique, or suggestions, and before using them in your own wealth management planning or with a client or prospect.  Information, concepts, and opinions provided herein are subject to change without notice.
The strategies contained within these materials may not be suitable for all clients.  For many concepts discussed herein, clients are strongly urged to consult with their own advisors regarding any potential strategy and will need to strategy described herein is suitable for their particular circumstances.
Examples, provided throughout these materials, are for illustrative purposes only, and no representation is being made that a client will or is likely to achieve the results shown.  The examples shown are purely fictional and are not based upon any particular client's circumstances.