3 ways advisors can win Millennial business

April 21, 2016 by Kyle Johnson

About the author:

Kyle Johnson

Associate attorney

Kyle’s primary responsibility is to facilitate and negotiate complex FinTech licensing transactions. He received his B.A. from the University of Wisconsin and his J.D., cum laude, from the University of Wisconsin Law School.

Millennials are changing the way advisors interact with clients. We have different goals, expectations, and communication standards.

I am a Millennial, and I do not work with a financial advisor. There, I said it. Despite working in the FinTech industry, recognizing the value an advisor adds, and being a quintessential mass affluent Millennial, I am not sufficiently motivated at this point to engage with an advisor. I am also not alone in this mindset. Why is that?

Reason 1: hubris

A lot of Millennials believe we can do our own financial planning as well or better than a professional advisor. Is this overconfidence? Almost certainly. Does that prevent us from doing it ourselves? Typically not.

Many daily tasks have now been replaced by a mobile app or a subscription service, and these tools engender a sense of autonomy. After all, most of these “life hacks” require some level of engagement from the consumer in order for the desired outcome to occur.

Take online grocery ordering and delivery for example. The user needs to log on, select the items, and place the order. The consumer is left with the feeling that they completed the task of grocery shopping even though others physically picked the items and carried the bags.

Financial services often lack this illusion of self-reliance. As a result, Millennial consumers are driven towards do-it-yourself investing solutions that, to our detriment, are strictly technology-based and fail to offer professional quality service. Doing your own financial planning with a robo-advisor is the financial equivalent of watching a few online home improvement clips and attempting to “flip” a house on your own. Yet, more and more Millennial consumers are being drawn to these services.

Possible solution: self-guided planning

How can the financial planning industry not only pique the interest of pseudo do-it-yourself Millennials, but also capture their business? For starters, give the consumer the tools to engage with the planning process.

Millennials need to feel as though we are driving the results and have some modicum of control. Because many of us began our careers during the Great Recession (be it justified or not), we are skeptical of financial institutions of all shapes and sizes. Therefore, we are reluctant to turn over control of our finances.

We are much more inclined to trust and rely upon technology where we control its use. As a result, we are not drawn to the utility or the service that something like a robo-advisor provides, but to the feelings of independence their use creates.

Reason 2: financial planning is often seen as “boring”

Herein lies a major, but often overlooked, challenge. An advisor can put all the bells and whistles into their planning process (including purchasing the latest and greatest FinTech), and the service ultimately may still fail to excite Millennial clients.

I recently tinkered with the robo-tool provided by my brokerage. I made it through three screens before I clicked off feeling underwhelmed and disappointed. For all the marketing, branding, and likely substantial investment in the capabilities of the technology, its user experience was nothing more than your basic risk tolerance questionnaire and fact finder that culminated (drum roll, please) with a chart showing my expected account balance in thirty years if I contributed “x” amount each month. (Cue sad trombone.)

Given this type of solution has been touted as one of the hottest new FinTech solutions to hit the market, the fact that the market lacks the kind of technology and planning experience that will draw Millennials in and keep us engaged is not surprising.

Possible solution: make planning fun

The element of fun is often overlooked. Superior ROI and goal-based planning are things that excite advisors. Millennials are more excited by the hottest mobile app, and we demand a similar engaging user experience from financial services.

It is, however, not all about the technology. The investing and planning process is as much about the organization or individual providing the service as it is about the tools. I have met with an advisor that began our conversation by asking if my family will be taken care of if I die, and he proceeded to pitch a life insurance policy all within the first 10 minutes of our meeting. I have also had an advisor try too hard sell me on the thought that no matter what I did on my own, I would never beat his rate of return. Both situations left me feeling like just another prospect.

In comparison, my wife and I recently went shopping for a couch. At the first furniture store, the salesperson tried to sell us a 6-hour in-home design consulting session. At the second store, the salesperson went to get our daughter a toy to play with first, and then proceeded to guide us through the couch design process.

For those that have ventured into the custom furniture design labyrinth, you know the process is tedious as the options are immense. I should have died of boredom, but I did not. I actually had fun. Why? This salesperson brought out a magnetic set of scale furniture tiles and had us play around with different furniture shapes and room configurations. She made it a game., and we purchased a couch as a result.

Now, let’s go back to the advisors that did not win my business. I was clearly interested in working with an advisor because I accepted both meeting requests. What if those advisors had made the process of financial planning fun? Better yet, what if they made a game of it?

It may sound juvenile that the willingness of a Millennial to consult with a financial services professional may hinge on whether or not the planning process is fun, but remember you are dealing with a generation that spent hours playing computer games like the The Sims where the goal is to help your avatar achieve financial success. Yet, most people will not spend 30 minutes planning their own finances. Why? Because it is not fun. A planning process focused on delivering an enjoyable consumer experience, rather than selling an outcome like peace of mind or a higher ROI, may resonate better with the Millennial generation.

Reason 3: the compensation model

Unlike prior generations, Millennial consumers have access to troves of information, both good and bad. It is not surprising that a lot of us stumble across harsh critiques of the “one percent of AUM model” and lack of a fiduciary standard.

In discussing this topic with my peers, this seems to be the common thread of why advisors are avoided by our generation. Giving up a significant percentage of my return to a party that may or may not be acting in my best interest is simply a non-starter. Many argue the DOL’s imposition of a fiduciary standard on all advisors will prevent consumers from seeking financial advice, but what about the consumers that do not seek advice because they do not trust the industry?

Possible solution: embrace change

The creation of the DOL Conflict of Interest Rule should be embraced. Those that feverishly adopt the standard and make it a central pillar of their business will be rewarded with increased consumer trust.

This may not occur overnight; however, as the industry enhances its credibility, these advisors will be rewarded. I have a much easier time accepting a percentage of my return will be foregone if I feel reassured that careful thought and preparation went into creating a robust financial plan that included an analysis of what financial products are best (not just suitable) for my family.

Grow your business by attracting Millennial clients

Through deliberate efforts to enhance the sense of autonomy, enjoyment, and trust of the Millennial consumer, advisors are much more likely to win our business. Embracing change and adapting to these consumer expectations will require advisors to rethink what service they deliver if they wish to preserve their business model.

Advicent offers a suite of FinTech solutions to help advisors meet the unique needs of every client. If you would like to learn more about the industry leading financial planning software solutions from Advicent, click here or call (855) 885-7526 to speak with an Advicent representative.