A Millennial’s Advice to RIAs

By admin_45 in Blog

“What’s better, Acorns or Betterment?” That’s the single question I hear most from my millennial aged friends and family. If you don’t know those names, they are “robo-advisors” – fintech powered apps and websites designed to efficiently manage retail investor portfolios. They have captured the attention of my demographic cohort so completely that I know only a few 20-somethings who would even consider a traditional financial advisor, now or in the future.

That said, all is not lost for wealth advisors’ ability to capture their next generation of customers. The playbook will just look very different from the past, and the game itself will take a lot longer. Here’s a few friendly suggestions of what can help financial advisors reach my generation:

#1 – Offer free content: While most of my friends don’t know much about investing, they are eager to learn. Advisors that act as their guide early on through free education will likely be their go-to advisor when they have more money in the future. The more effectively you target on this front – such as catering to millennials who work at tech companies or are majoring in STEM disciplines at top schools – the quicker you can close the gap from when you offer them free information to when they hire you.

Some examples include giving free seminars (bring food!) at colleges or town Starbucks targeted towards millennials on topics that are relevant to them, such as budgeting, paying off student loans, and investing for the future. If you have online reach, give free webinars as well. You could even gamify the experience by asking your kids or friends’ kids to get a big enough group together to answer any of their investing questions for a half hour.

Above all, use these events to start building an email list with potential millennial customers that you can send helpful information to on how to manage their personal finances. Even just one useful note every week will help keep you in their memory down the road when they are ready to pay for traditional advisory services. Just imagine if you had a young Mark Zuckerberg or Evan Spiegel at one of your educational sessions and kept in touch…

#2 – Build your brand on social media: Millennials are heavily influenced by social media and it captures much of their attention throughout the day. Your presence on popular platforms like Instagram are important if you want to build your brand and reach that cohort. This is again where giving free education/content comes into play; you could also offer giveaways to create a network effect to grow your list of young adult contacts.

Not every millennial will be able to afford your services, but it can help start planting a seed for when they can by providing them with useful advice and highlighting your services in return. This could also engender trust over time. No longer do young adults just go with their parents’ financial advisor, but after reading your insights for a few years they’ll have to at least consider what you can do for them. Perhaps a young person who follows you would even refer you to their parents…

#3 – Set up for the next downturn: Experienced financial advisors know everyone looks like a genius in a bull market. In this cycle, you can lump robo-advisors into that group. Most of them started after 2009. Neither their algorithms nor their customers have seen a real bear market or even a mildly scary correction.

When the next market drop comes – and they always do – some portion of robo-clients will want a more hands-on approach to managing their capital. If you follow steps #1 and #2, you will be their first call.

#4 – Be knowledgeable about responsible investing: Millennials are very sensitive and aware of social/environmental/diversity issues. There are plenty of environmental, social and corporate governance (ESG) ETFs – which we’ve highlighted in prior notes – to incorporate into client portfolios. Advisors should be ready with information on ESG investing when meeting with potential millennial customers as it will give them a sense of greater purpose when putting their money to work. In my opinion, it is also a “tell” on whether an advisor evolves his/her approach to investing and business practices.

#5 – Use ETFs: Numerous financial advisors use ETFs, but many also still use mutual funds. I personally would never use an advisor who does not use ETFs for most of my portfolio as they are cheaper and more cost efficient. Mostly relying on ETFs is a useful differentiator compared to other advisors that will show you have clients’ best interest in mind.

In sum, I know this advice looks very different from advisors’ past practices.The lead time is longer, the payoff is more uncertain, and customer acquisition is online rather than face-to-face. But this is ultimately a story about the effects of disruption on the money management industry. To win, incumbents must adapt. It can be done, and you can do it.

My generation will want your guidance. We just don’t know we need it yet.