Expand Your Practice: How to Reach Millennial and Gen Z Investors

Aug 15, 2022 | Blog Posts

One of the biggest questions on wealth managers’ minds is how to reach younger demographics of investors — particularly Millennials and Gen Z.  These groups are set to inherit trillions of dollars in wealth from their parents and grandparents in the coming years. Not to mention, people in younger generations are building thriving careers and benefiting from the success of their companies through IPOs, buyouts, and other positive outcomes.

If you’re a financial advisor, it’s in your best interest to build relationships with Millennials and Gen Z as clients. However, as with all generations, Millennials and Gen Z have their own unique preferences, lifestyles, and habits, so the process of establishing these connections may feel like a challenge for advisors in older generational cohorts.

Here’s how wealth managers can overcome friction and win relationships with the younger generation of investors.

The importance of reaching younger investors

As a general trend, new business development has been slowing for financial planning practices, according to the Ensemble Practice “Pulse of the Industry 2022 Mid-Year Survey.”

“The net increase was just 2.4%, significantly below 2021’s 6% and not even close to the average 10% target,” points out Jennifer Lea Reed for Financial Advisor Magazine.

There are a few reasons for this trend, with the biggest being talent. With the Great Resignation, many financial planning firms are having trouble retaining advisors. In order to sustain current workloads, new client development has needed to remain on hold.

This slowdown results in missed opportunities for firms to expand and prepare for the future. Especially given shifting demographics in the United States — particularly with existing clients reaching retirement age, succession planning, or passing on their wealth — financial advisors need pathways to maintain steady growth. The longevity of your practice depends on it.

Younger investors are the key to future proofing your core business and ensuring a stable pathway into the future. So how can you best reach younger generations, without overextending your talent and taking on additional strain to your core operations? The following suggestions will point you in the right direction.

How to connect with Millennial and Gen Z clients

The short answer: it’s about relationship-building. Similar to investors in older generations, every person is different. Attracting younger clients means understanding their worldview, challenges, questions, and needs as individuals. Here’s how.

Start building relationships with your clients’ kids

One research study from Ernst & Young has found, when assets change generations, firms typically lose 70%-80% of those assets. However, research from the CFA Institute and FINRA has also found that younger investors lack the confidence, education, and expertise to make their best financial decisions.  

As a financial advisor, why not get to know your clients’ kids? Invite them to participate in meetings, ask questions, and share concerns. By establishing this dynamic, you’ll create conditions for building trust and open dialogue. Come time to help execute a succession plan, this relationship will be crucial.

It could be the case that your clients’ children may not have a clear understanding of the services that a financial advisor offers.

“If financial professionals can clearly articulate the wide array of services they actually provide, such as tax planning, budgeting, debt guidance, home buying assistance and a network of resources that can meet the needs of younger generations of investors, then they could be more likely to capture these prospective clients,” explained Bill McManus, managing director of Applied Insights at Hartford Funds, in an interview with U.S. News and World Report.

Recruit younger talent to your own firm

Some Millennial and Gen Z clients may feel most comfortable working with advisors who are close to their age. The reason comes down to shared life experiences. Some younger people might be feeling worried about their financial futures in a way that older generations never were.

“The immediate priority, says Dr. Struck, research director at The Decision Lab in an interview with The Globe and Mail, is often a “stabilization phase” to give Millennials a sense of control over their finances. Only then can they absorb the risk associated with investments that provide higher potential returns and start building toward longer-term financial objectives.”

Younger talent understands these challenges. If they’re not experiencing financial challenges themselves, their friends and classmates could be.

That’s why hiring younger people to your team — even in non-advisory roles — can offer an advantage from an empathy-building perspective. These digital natives can help support functions including digital marketing, community outreach, and media-building. As an example, 34% of Gen Z learns about personal finance from TikTok

Long-term, the right hires may be coachable to potentially pursue careers as investment professionals and financial advisors. Or, these hires may stay at your business for a few years before moving on to graduate school or another career path. If you’re not in a position to hire someone full-time, you can always work with a consultant or freelancer.

Publish educational media

Thanks to search engines and social media, financial advisors have a continual open door to reach potential clients with answers to their pressing questions. But navigating these digital ecosystems, especially to build relationships with prospective clients, can be time-consuming and mentally tiring. 

One approach is to develop an educational content library that includes blog posts, ebooks, webinars, podcasts, and other media. That way, audiences keep your firm top of mind when seeking answers to questions. When they need insights, they’ll know to come to you first. 

Especially in today’s volatile and uncertain market, younger generations are seeking out education proactively. In one study of Millennials, for example, sixty-five percent said they want education that helps them become smarter investors. They’re self-educating and seeking out true advisors— in another study, Millennials were more likely to have a financial advisor than Gen X and Baby Boomers. 

For younger generations, education is a powerful form of relationship building. Your wisdom has value. Media can help you capture and distribute it at scale.

Make technology a part of your value proposition

Millennials and Gen Z seek empowerment through technology.

In one survey, 64% of wealthy millennials expressed a desire for more efficient management of ongoing investing tasks to optimize performance, like rebalancing and tax loss harvesting.

Meanwhile, another study expressed that Gen Z’s tendency to seek advice through social media may be leading them down the wrong path.

Financial advisors can use technology to establish a more direct line of communication with clients. For instance, CircleBlack provides an investor portal for financial advisors to share documents, provide status updates, and pass along research. The idea is to get on the same page and to stay on top of the market.

Everyone’s financial situation is unique and requires a high degree of personalized attention, and having the right technology in place  can help advisors easily deliver that customized experience.

Final thoughts

Millennials and Gen Z are looking for true advisors who can provide meaningful guidance. After all, today’s markets are confusing. What will be the future of cryptocurrency? What actions should investors take when navigating volatility in the market? What asset classes will best help them reach their financial goals?

These are tough questions to navigate alone. As an experienced wealth manager, your perspective matters during unprecedented times. Millennial and Gen Z investors want to hear from you. 

Learn more about CircleBlack

CircleBlack is an all in one management platform for the wealth management industry. You can think of it as an operational dashboard to better connect financial advisors and their clients around a shared perspective. The outcome is better collaboration.

To learn how our software can help you build, manage, and grow your wealth management practice, get in touch.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.

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