Embracing Heir, Millennial and Robo-advisor Opportunities

Investors want a leader, but not the stereotypical kind, reports Money magazine. Citing a 2014 study by the Financial Planning Association, almost 90 percent of clients want their financial planners to be strong leaders. Based on these insights, financial planners with advanced designations are highly preferred by investors over advisors who simply have a standard college education and required FINRA licenses. Consider these three ways modern advisors are taking the lead, bucking trends, and more.

1: Retain Heirs Upon Wealth Transfer

The United States is on the cusp of the largest wealth transfer in the country's history as about $40 trillion will be handed down to the next generation by 2050, according to Think Advisor. Unfortunately, many advisors never have the opportunity to meet their clients’ children and other eventual heirs. In a survey of more than 1,000 investors conducted by MFS Investment Management in 2013, 75 percent of investors said their children had never met their financial advisors, which likely explains why only 2 percent of children continue working with those advisors after their parents pass away.  

In other words, the death of a client is often the end of your relationship with the family and in turn, the end of you managing their wealth. This parting of ways is not only unfortunate, but also completely unnecessary, presenting you with an opportunity to convince the heirs that a continued relationship is a valuable, efficient and intelligent next step. A study on investor preferences in selecting financial advisors reported that 90 percent of respondents see a potential advisor’s certifications as important, with 60 percent indicating they are very important. Your credentials and the pre-existing relationship you built with a client’s loved ones will be hard to argue even if the next generation of heirs aren’t personally familiar with that relationship.  

2: Win Millennial Business

In a report highlighting some of the problems with current financial advisors, research firm Corporate Insight found that advisors "do not completely understand investors' values" and "remain fixated on mass targeting affluent and high-net-worth investors." While many advisors see client acquisition opportunities within the emerging millennial market, this disconnect creates difficulty. Millennials desire convenient relationships with advisors who understand millennial values, and while this younger generation (born between 1980 and 1992) is highly entrepreneurial, their memories of the 2009 recession has made them widely (and understandably) wary of capital markets. With the growth of more passive and less intrusive investment approaches like robo-advisors, millennials have financial planning options that negate the need of a personal advisor. Forward-thinking advisors who wish to earn these young investors as clients must be cognizant of this demographics’ values, emotional triggers, wariness, skepticism and needs, which drastically differ from older clients like boomers, Gen X or even Gen Y.

Advisors can prepare to successfully serve millennial clientele by making an effort to adapt to better meet millennial needs. It’s not enough to simply acknowledge a client's unique requirements; success comes from the ability to optimally deliver through ideal solutions and strategies for targeted needs and circumstances. Case in point is the student loan debt epidemic plaguing millennials nationwide. Advisors should be aware of the situation and empathetic to the ways it affects the individual’s life, but also able to prepare an ideal financial plan that accounts for paying down student debt responsibly.

3: Overcome Robo-advisors

When robo-advisors first appeared, it may have been tempting to dismiss them as a fad. Now established companies such as Schwab and Vanguard are embracing this technology, and their actions will "legitimize robo-advice, making the automated investment tool model more mainstream." While these robo-advisors can “advise” on a diverse mix of investment options, the services are passive, with little room for customization or taking into account clients’ personal preferences and one-off needs. Indeed, robo-advisors have plenty of downsides. No machine can provide the“personal touch” that comes from working with a human advisor. An advisor with the right training also knows how to create individualized financial plans that address unique investor requirements and challenges, something a robo-advisor can't do as well. 

If you’re looking for ways to diversify or solidify your existing client base, or are interested in developing a more thorough understanding of comprehensive planning concepts, consider learning more about the Chartered Financial Consultant® (ChFC®) designation. The knowledge delivered through ChFC® positions advisors to build their practices quickly, confidently and lucratively. Read "How the ChFC® is a Game Changer in Advancing Your Financial Planning Career" to learn more.