How to attract younger clients, and why you might want to
According to the Financial Conduct Authority, only 6% of 18-34-year-olds took financial advice in 2017. So, what can advisers and planners do to attract younger clients? And why would you want to?
Young clients want a financial adviser’s help
A 2017 study by Schroders found that half of all IFAs turned away clients with less than £50,000 to invest. Among them would have been plenty of younger clients – many in graduate or professional jobs – who simply didn’t meet a firm’s arbitrary criteria to become a client.
However, studies have found that millennials are interested in financial advice. Recent analysis from Scottish Widows found that 73% of people want a financial planner to help them predict how major life moments could impact their finances.
The data found that one in four 18 to 34-year-olds want their IFA to offer real-life scenario exercises for life situations such as marriage, divorce, and having a family, a figure four times higher than clients aged over 35.
Many of the most important financial planning questions are unaffected by a person’s age or wealth:
• What are my life goals and ambitions?
• Will I be able to afford my lifestyle in retirement?
• Do I have a financial cushion in place if my plans are unexpectedly blown off track?
• Will my partner and family be secure if something happens to me?
• Can I afford to buy a home?
Every financial planner knows that starting to make pension provision early gives clients a massive head start. You know that saving tax-efficiently can help first-time buyers to build up a deposit more quickly. You’re used to ensuring that clients have the right protection in place so their family benefit from financial peace of mind.
Where cashflow modelling works well with younger clients
As the Scottish Widows study found, young people want a professional planner to model scenarios for them. They want to see what affect buying a home, having a family, or a serious illness can have on their finances.
Good fact-finding and cashflow modelling can help clients to understand their income and expenditure. Clients often realise that they have more disposable income than they thought, and that saving a bit extra is perfectly possible.
Using cashflow modelling interactively in a meeting with clients means you can show them a range of scenarios. It gives them the confidence to make life-changing decisions, and the security that they are on track to meet their goals.
Cashflow modelling benefits 18-34-year-olds by:
• Helping them to visualise the impact of financial decisions
• Encouraging regular saving
• Enabling them to ‘see’ the future
• Getting them to think about the bigger picture, and their goals and ambitions.
Cashflow modelling also encourages regular reviews and a long-term approach. You can develop a long-term relationship with clients, meaning these younger clients could end up generating fees for you for 20, 30, or even 40 years to come.
Retaining younger clients through intergenerational planning
A study by the Centre for Economics and Business Research has suggested that, over the next 30 years, millennials will inherit an estimated £5.5 trillion from baby-boomers.
At the same time, research by Kings Court Trust shows a quarter of inheritance beneficiaries are already walking away from their parents’ or grandparents’ IFAs, typically taking £288,000 with them.
Even if you have an exceptional relationship with your clients, there are no guarantees that their children or grandchildren will prolong their custom. So, planners need to find engaging and innovative ways to involve all family members in financial planning discussions.
Here’s another area where cashflow modelling can help. You can incorporate all family members into the process, showing side-by-side scenarios to consider issues such as funding university costs or opening the doors to the Bank of Mum and Dad.
As well as helping children to understand their parent’s financial planning, it’s a really powerful way of ensuring the children of clients also develop a long-term relationship with you.
How do financial planners compete with robo advice?
Millennials have a wider choice of digital and fintech services than ever before, so the need to find an old-fashioned planner might not seem particularly pressing.
DIY platforms from Nutmeg to Moneybox have brought money management to a younger generation. Add in the growth of ‘robo advice’ and it’s clear that traditional financial planners are facing strong competition from something as simple as an app on someone’s phone.
The first way is to remind younger clients of the benefits of advice. At a basic level, robo advice is nothing of the sort. Suggesting a fund to a user based on their self-diagnosis hardly constitutes ‘advice’. Even the FCA has warned that there is ‘scope for a mis-selling scandal’ if poorly designed robo-advice models put people into unsuitable funds, or give guidance masquerading as advice.
Satisfying the younger generation’s demand for tech
Secondly, embrace and adopt tech yourself in your advice process. Use the power of cashflow modelling to show younger clients a range of scenarios and the impact of their decisions now on their long-term future. Use social media proactively to keep in touch with clients and prospects. And, embrace tech within your own business, as this can result in cost savings that you can pass on to clients.
Cashflow modelling doesn’t have to be complicated.