How important are financial advisor referrals to young investors?

At a time when social media is being pushed as the premier way to tap into a younger target market, insurance agents are finding that millennials and Gen Z highly value referrals from family members, friends and other consumers.

Studies published over the past few years have indicated that younger Americans prefer to go online for financial advice. However, Diane Delaney, executive director, Private Risk Management Association, suggested they highly value trust real-life testimonials and referrals.

“While they are responding that they want the ability to do things digitally, not have to talk to someone, it’s actually opposite than what they’re tending to do for major decisions, which is going to someone for their advice,” she said. “This generation, more than any other, tends to want to ask their parents for advice before they make major decisions.”

When discussing diverse strategies for successfully reaching and building relationships with younger clients, multiple advisors told InsuranceNewsNet that personal referrals from family or friends go a long way.

Gen Z trusts advice from their elders

In a 2024 Estate Planning Study, Trust & Will found a large percentage of millennials and Gen Z Americans want to seek professional financial help.

“More than half of millennials and Gen Z (57%) express interest in working with financial advisors for estate planning, suggesting a generational shift towards professional guidance,” Samuel Deane, Trust & Will financial advisor said. “Almost a quarter of respondents (23%) included hiring a financial advisor as part of their 2024 or 2025 financial goals.”

However, when it comes to selecting an advisor to work with, “a striking 28% of respondents, predominantly from Gen Z (48%), express a preference for using the same financial advisor as their parents or family members.”

According to Craig Martin, J.D. Power executive managing director and global head of Wealth & Lending Intelligence, one of their studies also found 20% of millennials and Gen Z clients choose to work with a particular advisor based on a family member or friend’s recommendation.

“This is more than double the amount of Gen X and older,” he said.

A family affair

Aaron Cirksena, founder and CEO of retirement planning firm MDRN Capital, said word-of-mouth referrals from pre-retiree clients are “one of the biggest” ways his company connects with younger clients.

“A lot of the time, [clients] will say, ‘I’ve really found value in you taking me through your process. I have a son, a daughter, a grandchild even, who obviously doesn’t have the same amount of money saved up as I do… We tell them, ‘If you’re coming on board as a client, we’re going to be willing to help your son or daughter with the maybe different problems that they face than you, even if they aren’t necessarily at our minimum,’” he said.

Julia Bartak, a financial advisor at Edward Jones, said her experience has been similar.

“I have found a lot of success connecting with the GenNext kids of Generation X clients,” she said. “I’ve noticed that the earlier you are introduced to the next generation and have time to develop a relationship, the more likely they are to become clients while they are in the GenNext early career phase.”

The impact of personal touch

Advisors are also finding young clients tend to be swayed by real-world testimonies — either by witnessing something firsthand or through a friend’s advice.

“If you look at the younger generation as a collective whole, maybe they don’t focus as much on money because they are a little bit more of the ‘worry about it later’ generation,” Cirksena said. “But, when people have families or people have kids, a lot of times those things can sort of spark in their brain that, ‘Hey, I need to start thinking about this stuff or worrying about some of this stuff.’”

“New clients have heard of me because a friend or colleague liked one of my social media posts, which resulted in my post showing up on their main page,” Bartak added. “The more personalized posts have led to the most contacts from prospective clients.”

Online reviews matter too

Gen Z clients also tend to pay attention to reviews or referrals from existing customers when deciding on a financial advisor, Delaney said.

“I do think they’re very big on reading the type of reviews that the companies have, how they’re performing, and really trusting the advice of others,” she said.

This is an area where the insurance industry as a whole could improve its marketing approach by focusing more on customer testimony instead of on metrics like “we’ve been in existence for X amount of time and we have white glove concierge service,” Delaney suggested.

“It’s that slight change in how we’re talking about ourselves. We’re not talking about ourselves; we’re telling you why other clients said they want to work with us,” she said.

PRMA, founded in 2014, is a nonprofit membership organization comprised of more than 3,000 high-level risk management professionals in the United States.

Trust & Will, based in California, is a digital estate planning firm founded in 2017.

J.D. Power is a data analytics, consumer insights and advisory services firm founded in 1968.

MDRN Capital, founded in 2023, is a full-service firm that specializes in retirement planning.

Edward Jones is a Missouri-based financial services firm founded in 1922. It has over 18,000 advisors across the United States and Canada.

 

Rayne Morgan is a content marketing manager with PolicyAdvisor.com and a freelance journalist and copywriter.

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.