As a teenager, I once asked my father, “Dad, if you could go back in time with all the knowledge you have today, what would you do differently at my age?” The question certainly caught him off guard, but his response was illuminating to me as a young adult. He said he wished he would have started investing money earlier so that he could benefit more from the compounding interest over time.
My father made choices as a young man that kept him from investing his money like he wanted to — he bought a house, he had three kids, he purchased a new car — all great choices, but they came with opportunity costs attached: missing out on something (investing) to gain something else (a house and kids.)
Many financial advisors today are presented with similar opportunity costs. I would argue that most, and rightfully so, focus on clients nearing retirement who have accumulated a good deal of wealth by that time. However, by choosing to focus on this wealthier and generally older audience, advisors miss out on capitalizing on a future generation of wealthy investors who are, today, more likely to be younger and less affluent.
Here are four reasons why advisors should widen their lens when considering who their ideal prospective customers are instead of just focusing on those with money today:
- 1. Their wealth will grow.
As obvious as it sounds, those with little wealth today could very well grow into those with sizable wealth in the future. Ignoring younger consumers means advisors are ignoring the future opportunity these potential customers present. If advisors don’t focus on their customer pipeline, that pipeline could eventually run dry.
- 2. Earning their trust will take time.
One day, younger generations will have sizable wealth to invest with advisors they trust. But trust isn’t built in a day among Gen Z and Millennial consumers. It takes time. Advisors need to start building the relationship today by providing consistent personal finance content centered around life goals instead of financial services.
One day, younger generations will have sizable wealth to invest with advisors they trust. But trust isn’t built in a day among Gen Z and Millennial consumers. It takes time.”
- 3. Their needs are (relatively) simple.
For many young consumers, their financial needs are comparatively simple at this stage in their lives. Most simply seek confidence and deeper knowledge to make informed financial decisions. If properly nurtured and supported today, healthy financial habits can be instilled in younger consumers which in turn lead to larger financial portfolios for advisors to manage in the future.
- 4. Technology doesn’t solve everything.
Many financial advisors (and experts in other fields) believe offering the latest tech to Gen Z and Millennial consumers will earn loyalty from those groups. While such technology is essential, it is highly unlikely to help the majority of younger consumers make sound, long-term financial decisions. Finances are complex and deeply personal — the latest and greatest tech tool will always fail to replace the trust and relationship built between advisor and client.
Financial advisors cannot simply focus on a small group of already affluent clients. The opportunity cost is too great to ignore today’s younger generation of investors. By expanding their target customer base, advisors can identify growth opportunities within the Gen Z and Millennial categories and gain insights on how to connect with these potential new clients with relevant offerings, creating a revitalized pipeline for their practices and future growth.
Read a recent post about research strategies to help you keep on top of shifting financial services trends.
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