Bill McManus | Thu May 12 11:30:00 EDT 2016
May is graduation season, a time when families celebrate, job searches begin, first apartments are found, and the prospect of financial independence is welcomed. For many, however, along with the exciting factors, graduating also means that the dreaded time has come to begin paying off their student loans.
Given the heavy debt burden many young Millennials carry, financial advisors might instinctively refrain from trying to court them as clients, but ignoring this cohort is a mistake. There needs to be a shift in the mindset among the financial advisor community with regard to these relatively new, possibly in-debt professionals. On the surface, it may seem fruitless to expend time and energy on them, but the reality is that this is the group of people who may ultimately receive a massive transfer of wealth over the next few decades. Therefore, financial advisors need to begin laying the groundwork with these potential future wealth holders now, regardless of their existing level of debt, and finding ways to build relationships with them.
I suggest that financial advisors incorporate the youngest members of the workforce into their overall growth strategy, regardless of their level of student loan debt. Here are three ways to make it happen:
1. Hold a family meeting.
Undoubtedly, some of your existing clients are parents to college-aged or recently graduated children, so leverage that relationship to beef up your pipeline of younger clients. Identify which of your clients have adult, working children, and give them the option of bringing them to a meeting. We all want to work with an advisor whom we trust, and if a parent is already working with an advisor—and is satisfied—then there is probably a better chance for that same advisor to land their offspring as clients. Having the parent make the introduction to their adult children is an easy, efficient, and low-cost way to make the first connection with the next generation of investors, so that you can start building a relationship with them now. After all, despite any student loans they’re paying off today, they are likely the people who will inherit your clients’ wealth tomorrow.
2. Host an unconventional client event.
I’ve said before that Millennials have different ways of communicating and generally prefer more casual, social meetings, so plan accordingly. Think about what this generation values and what appeals to them, such as fitness, philanthropy, or continuing education, and structure an event around these preferences. Examples might include a yoga class, a volunteer outing, or a skills-building workshop. For those who do have student loan debt, consider developing a program focused on managing down debt and smart budgeting in the real world. These types of events provide the opportunity for advisors to relate to and engage with young professionals in a comfortable, informal setting. Putting these prospects at ease can in turn help facilitate trust and open communication, facets that can serve as the foundational building blocks for the development of an eventual financial advisory relationship.
3. Focus on their immediate needs.
When you meet these younger professionals, through a family meeting or a tailored client event, follow-up with them to have a conversation on what guidance you can offer that would resonate with them. Investors today seek empathy and personalization from advisors, so with younger clients, the key will be to assist them with developing a plan to tackle their most top-of-mind financial concerns, such as student loan debt. When just starting out, it can seem impossible to pay for housing, keep up with bills, and factor in monthly payments, all while also trying to maintain a social life, which, for many at that age, might entail shelling out big bucks for expenses such as a first car, a mortgage, trips to visit long-distance friends, or weddings. If an advisor can show them how to do it all, in addition to contributing to their retirement savings, they might just secure themselves a client with serious longevity.
While it may be a general assumption that young Millennials do not have the caliber of investable assets of their older colleagues, thinking that way can be shortsighted and may just cost advisors in the future. Student loan debt is an epidemic for young professionals today, but that does not mean that this cadre should be snubbed. Financial advising is hinged on client relationships. Start wooing young clients now, debt or no debt, so that you don’t risk getting left behind when they finally become the wealth holders and big investors.