How to Keep Millennial Clients From Flying the Coop

By Brian O'Connell InsuranceNewsNet

Millennials aren’t the most loyal bunch to investment advisors, but with $30 trillion in wealth transfer assets to invest, have enough pull to make advisors work harder for their business.

The secret to winning over millennials isn’t technology, as many Wall Street gurus believe.

What they really want from investment advisors is better communications and more hands on help, according to the J.D. Power 2018 U.S. Full Service Investor Satisfaction Study.

"The financial services industry has been fixated on the idea that cracking the code on millennial investors means huge investments in digital and mobile," said Mike Foy, senior director of the wealth management practice at J.D. Power.

Although the digital experience is important, Foy said, “real loyalty among millennials is much more heavily influenced by frequent communication with an advisor in the context of a goals-based strategy.”

Currently, the millennial attrition risk for investment advisor relationships is four times higher than other generations, the study found.

Among investors who are most highly satisfied, 29 percent of millennials say they will consider leaving their current full-service advisory firm within the next 12 months. That compares to just 4 percent of similar investors in older generations, the report found.

“Millennials are most likely to indicate their intent to switch firms (44 percent) when they are using self-service mobile tools and advisor communication fails to meet their expectation,” the report said. “By contrast, when advisors deliver frequent, effective communication and show progress toward goals, millennial likelihood of switching drops to just 17 percent.”

'They Treat Them Like Children'

Yet even investment professionals believe their industry is still struggling to meet the expectations of younger investors.

“Financial advisors drive millennial clients away because they treat them like children, when they really need to feel they’re on a team,” said Misty Lynch, a certified financial planner with John Hancock in Boston.

Advisors often make a mistake by limiting their financial advice to younger clients to pay off debt and save money in their early years, she said.

“While these are really great points, what we should do is listen to what our clients want out of life and then provide advice that helps them meet their goals,” Lynch said.

If financial advisors want to retain millennials they should start by asking what their goals are and then see if their financial behavior is helping them get there or needs some adjustments.

“This will help build a lasting relationship so when the client’s goals start to change they will know who to go to for advice,” Lynch noted.

Advisors who focus on data over relationship building may be risking a hasty exit by younger investors.

“Millennials are accustomed to having abundant information at hand,” said Jake Northrup, a millennial and money manager at Ballentine Partners in Waltham, Mass. “Rather than trying to tell them what to do, it’s more effective to help them understand the pros and cons of their various choices and work with them to collectively make an informed decision.”

Stepping out of their financial planning comfort zone means wealth managers need to block out the need to discuss retirement planning with millennials.

“Millennials are not thinking about retirement when it may be 20 or 30 years away,” Northrup said. “They want to focus on the more immediate topics, such as paying off their student loans, maximizing their employer benefits or buying a home.”

Setting Priorities

Being more “relatable” to millennial clients should be a big priority for advisors, he added.

“The very professional, serious advisor wearing a fancy suit may turn off some clients,” he noted. “Clients may respond better to more casual and genuine communication where they view you as a peer, rather than just an advisor.”

Effective communication is especially crucial in the relationship between financial advisors and millennials.

“Financial advisors must establish the relationship with recurring, proactive communication that shows value by providing advice relevant to the individuals’ current needs and interests,” said Robert Roley, managing director at SS&C Advent in New York City.

Advisors should set proactive reminders in their CRM system to maintain a steady stream of touchpoints for each millennial client and keep notes on preferred communication methods such as text, e-mail or phone calls.

“This will ensure that advisors are communicating in a way that’s most beneficial to the millennial client while helping them track toward their goals,” Roley said.

Another relationship-building tip for investment professionals working with millennials: hosting semi-annual events for millennials to build trust and communications.

“Advisors can use networking events, cocktail hours and sporting events to engage with a younger client base on a more personal level.” Roley said.

Perhaps the biggest takeaway for advisors courting millennial clients is the understanding that younger clients are satisfied if they feel they’re making progress and meeting their financial goals.

“Financial advisors should go one step further by providing education and financial literacy advice on skills such as budgeting, saving, credit and more,” Roley added. “This will show value and will likely increase the chances of retaining their millennial clients.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].