Reaching the Next Generation of Clients

When speaking with advisors about reaching the next generation of clients, I often think back to a story of simple ingenuity that my father told me years ago. I can’t guarantee 100-percent accuracy, but Dad made a point that resonated, so I’ll try to paraphrase it here.

An enterprising young man approached the Crest toothpaste company. The man told Crest that he had a cutting-edge innovation that would result in soaring toothpaste sales and a potential immediate 40-percent increase in revenue. Furthermore, he said no budget would be required; it would cost the toothpaste manufacturer almost nothing to implement. The innovator offered to sell his idea to Crest for $100,000—no small sum for the times. The man promised that his fee would be recouped quickly if his idea was implemented. 

Crest politely dismissed the man—but its curiosity was stirred. The company tasked its key product developers to come up with their own “40-percent solution.” Days turned into weeks and then months, but no useful solutions were developed. So, Crest called the man back and agreed to his terms for the innovation. 

Once the legal niceties were complete and the $100,000 was handed over, the man passed a note that said these four words: “Make the hole bigger.” That was it! The man realized that by increasing the diameter of the toothpaste tube’s opening, the toothpaste would come out faster. Thus, consumers would use more toothpaste and would need to purchase toothpaste more frequently.

So, you’re probably thinking, "Great story, John, but how is it relevant to me?" Well, I'm glad you asked. Simply put, minor adjustments can lead to major improvements. I think you'll find this is particularly true when it comes to working with millennials. Let's start by briefly exploring this opportunity, plus strategies for success when it comes to reaching the next generation of clients.

Now, if you’re like some of the seasoned advisors I work with, you might feel it isn’t worth the work to go after millennial clients. In fact, it might not be that much work when you consider these three facts: 

1. A dollar retained is worth more than a new dollar brought in.
2. Your prospects are more similar to you than you might think.
3. There are many parallels between your current clients and this “new” generation.

If that’s not enough to sway you, just think about this: the potential dollars up for grabs via intergenerational wealth transfer is often quoted at $30 trillion!

To put this next generation into perspective, what would you say if I asked you what the biggest difference is between Barry Manilow and Barry Bonds? (Just to let you know, there are actually 76 million differences.) What I'm thinking is that Barry Manilow was born in 1946, while Barry Bonds was born in 1964. They are at opposite ends of the baby-boomer generation (probably a major demographic of your clients), and at 71 years old and 53 years old, respectively, they likely have vastly different financial views.

Apply this same logic to the millennial generation, which is 80 million strong and includes those born between (roughly) 1980 and 2000. Just as with baby boomers, it's a challenge to be all things to all people. Instead, be unique. Be all things to some people. In other words, focus on those individuals whom you like and trust to maximize the relationship. With this in mind, here are a few groups you may want to target within the millennial space.

Children and grandchildren of your older clients. Even if you’ve helped your clients amass wealth that can’t be outlived, you’ve really done only half the job—unless your client designated Uncle Sam as a beneficiary. In other words, poor structuring of assets and even more mistakes on simple beneficiary forms will probably lead to the IRS enjoying a significant portion of the $30 trillion I referenced earlier.

To reach the next generation, help your current clients ensure that their money goes to whom they wish in the most tax-efficient (or tax-free) way possible. Once that's been accomplished, host a family meeting with all beneficiaries involved to showcase your client’s hard work and generosity, while also subtly exhibiting your expertise and the value of advice.

Entrepreneurs. A few years ago, the IRS reported that about 3 percent of all million-dollar tax returns were filed by taxpayers younger than 35, with about 400 making in excess of $10 million. I’m not saying that you have to focus on just the elite segment. What I am suggesting is that successful entrepreneurs are so focused on their businesses that they often need the expertise of an advisor to help manage their finances and their future.

Community advocates. These individuals are natural social connectors and, as such, likely have the qualities that you are looking for in a client. Plus, like-minded millennials tend to be great referral sources, as they are known for introducing friends and colleagues to individuals they trust.

When it comes to millennials, you will likely find many differences between their generation and that of your client base. But you may also find many similarities in terms of their financial needs and goals. With that in mind, here are just a few things to think about when working with millennial clients.

Long-term perspective. Millennials tend to start saving for retirement early, and they have a habit of switching jobs, so your expertise regarding rollover opportunities will certainly come into play. They are also moving into their prime earning years faster than prior generations, so be sure to focus on income planning strategies that can help them meet both their lifestyle needs and overall financial goals. Remember, they will look to you for expertise and experience in building financial stability for the long term, something they can’t find with a technology-based solution.

Collaboration. In general, millennials prefer collaboration, so the goal is to work with these clients toward their goals rather than teaching them what they don’t know. When you apply stewardship over salesmanship, not only will you stand apart from other advisors and technology solutions, but you will position yourself as an advocate for your client.

Relationship. Building a trusting relationship is always part of the process. Next-generation clients, as with most of your other clients, want you to listen and understand their family concerns, why their work is important to them, and what they do for fun before financial matters are addressed.

Personalization. Many clients have similar financial goals, but how we each get to those goals is usually unique in some way, shape, or form. It requires a personal touch that can’t be found in an online robo but that you can provide in both your communications and your level of accessibility. Keep in mind that, contrary to popular belief, millennials embrace face-to-face meetings as their choice for important financial discussions.

Getting back to my story, the toothpaste company didn’t change the core of what made it successful; it was open to new ideas and made a minor adjustment that led to a major increase in revenue. In these challenging times, there is no doubt you are stretched for time. But if you remain open to new ideas to grow your business, your firm will successfully compete—and thrive—for years to come.

What simple strategies have you used to reach millennial clients? What similarities do you find between this next generation of clients and your current clients? Please share your thoughts with us below!