Finding Opportunity in Unexpected Places

Bill McManus   |  Mon Aug 31 15:00:00 EDT 2015

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My firm, Hartford Funds, recently conducted a survey with over 100 financial advisors that unearthed several missed opportunities. The data brought up three particular pain points that can be turned into advantages for financial advisors, if used wisely.

Challenge: There is confusion over the term ‘Millennial,’ likely leading to advisors missing an opportunity to engage clients in the best way possible.

Fifty-six percent of FAs said that they target Millennials less than other age groups—or not at all. Millennials (Gen Y) are characterized as individuals who were born between 1980 and 2000, making the age range 15-35 years old. For FAs, Millennial clients are those in their 20s and early-to-mid-30s. Here’s where things get curious: despite over half of the surveyed advisors claiming they don’t target Millennial clients, 63 percent of the same group of advisors said that they pursue prospects that are aged in their early 20s to mid-30s—the age range of Millennials. That is a huge, and significant, disconnect that warrants attention.

Opportunity: Recognize Millennial clients and prospects, and interact with them in a more tailored manner.

Make a list of your current clients that are 22-35, and ask your current clients who have Millennial-aged children to bring them in to a meeting. Make a concerted effort to communicate with your Millennial clients and prospects in the manner preferred by their generation. Think technology and email interactions, casual and fast meetings, empathy and collaborative planning. I shared several tips on how to better reach Millennials in my Summer School video, as well as through my ‘Rule of –ates’ series of posts.

Challenge: Despite expecting a long career, advisors are thinking short term when it comes to client acquisition.

Seventy-one percent of the advisors we spoke with plan to work for at least 16 more years, and 53 percent plan to work for more than 20 more years. Breaking down the data even more, we found that 55 percent of the advisors who plan to work for at least 16 more years do not target Millennial clients, and 51 percent who plan to work for more than 20 more years claim the same.

That’s another important disconnect. FAs are planning to be in business for the next 15-20 years, and yet they aren’t focusing now on attracting younger clients, who will be in the prime of the wealth in 15-20 years.

Opportunity: Plan for the future of your career by beginning to engage tomorrow’s clients.

Another reason that targeting Millennials is important is that, as we’ve mentioned before, Gen Y makes up about 25 percent of our current population, and it is predicted that by 2020, nearly 50 percent of those in the workforce will be from Gen Y. If you’re planning to still be working as a financial advisor in the next five years, this means that Millennials are integral to the future of your business. Consider giving their generation some love, because they are the group that you will want as clients in the not-so-distant future. Remember that your current clients are resources for referrals (another reason to ask your more senior clients to bring their children in for an introduction—maybe at a coffee shop instead of your office), and start to think about how you can begin to enhance your technology usage and online presence.

Challenge: Risk aversion is on the rise, putting investors at a greater risk of making emotional decisions.

The final data point that FAs should take heed of is about risk aversion and investor anxiety. The survey results showed that 56 percent of FAs noticed that their clients have already allowed their anxiety to adversely impact their investment decisions. In addition, 57 percent of respondents said that they expect clients to become even more risk averse in the next 12 months. Keep in mind that we have conducted this survey for three consecutive years—in 2014, only 35 percent of FAs expected risk aversion to rise, and in 2013, the number was just 17 percent.

Opportunity: Be proactive in counseling your clients through market volatility and investment anxieties.

When investors get scared, their knee-jerk reaction might be to make emotional decisions with their money. The survey shows us that FAs already recognize this behavior in their clients, and that FAs expect risk aversion to grow. But research has shown that investors who make emotional investment decisions tend to underperform the S&P 500 Index1. In fact, impulsive, short-term-focused investment decisions can actually have negative repercussions for their finances. Get ahead of this trend, and don’t wait for your clients to come to you with their anxieties. By being proactive, you can show them that you understand their fears and are looking out for their best interests. A blog post by my colleague John Diehl gets into more detail on how to curb investment anxieties, as does our Media Replay content.

While our survey may have uncovered themes that are not entirely uplifting, the good news is that, amongst all of the disconnects and worries, there lies opportunity for growth, improvement and a strong advisor-client relationship. Use this information to your benefit by employing these simple, easily incorporated solutions, and you could avoid letting these trends work to your detriment.

Data Source: Qualitative Analysis of Investor Behavior, DALBAR, For period ended 12/30/2016. Performance data represents annualized returns for the period 1997-2016.

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Bill McManus

Bill McManus  

CIMA®
Director, Strategic Markets


Bill is part of the Strategic Markets Team for Hartford Funds. In his current position, Bill is responsible for engaging and educating both financial advisors and their clients about current and emerging opportunities in the financial-services marketplace. These opportunities range from tactical strategies in areas such as retirement-income planning, investment planning, and charitable planning, to anticipating and preparing for long-term demographic and lifestyle changes.

Bill joined the organization in 2003 as an advisor consultant responsible for marketing Hartford Funds in Virginia and West Virginia. Bill earned his Certified Investment Management Analyst (CIMA®) designation, is FINRA Series 7 and 63 registered, and holds his life and variable insurance licenses.

Bill has been widely quoted in consumer and trade publications such as US News and World Report and Wealth Management.com. He has also appeared as a featured guest on Bloomberg Radio to discuss his views on retirement-related topics.

Originally from Smithville, New Jersey, Bill attended the University of Pennsylvania where he earned a bachelor’s degree in political science. He currently lives in Philadelphia, Pennsylvania.


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