Seven Ways for Advisors to Learn Their (Gen) XYZs

Aug 25, 2011

There’s an emerging affluent market out there and the opportunity is there for the taking. OK, maybe the Generation Zs Baare a little too young, but now is the time to look at the under-50 market made up of Trailing Edge Boomers, Gen Xers and Gen Ys. According to VIP Forum’s Survey of Consumer Finances, they make up 42% of the current high-net worth market with assets between $100,000 and $1 million.

So what does this mean for you? The 75 million baby boomers that are in or approaching retirement are going to spend down their portfolios. Why not build relationships with the under-50 investor so that you can continue to compete in your market and generate new revenue for your practice? But don’t think you can to do the same old, same old though. This generation is looking for a fresh approach, requires more hand-holding during volatile times, and is much more tech-savvy.

An action plan can help you make subtle shifts in your practice so that you can become more attractive to the younger set. Here are seven things you should consider as you weigh the Under-50 opportunity:

1. Start gathering referrals. A recent research study from Cisco reports that 32% of the wealthy investors under-50 say they will switch advisors in the next few years – compared to only 8% of wealthy boomers and 5% of wealthy seniors. If you can add value and address their insecurities, you could develop a lifelong relationship.

2. Turn it on. The demand from the under-50s for a higher level of service means cranking up the maintenance activities. Make sure you are able to communicate using the methods that they prefer such as text, e-mail or even video conferencing. Also, invest in a CRM system and automated campaign tools. (SEI has created a Marketing Campaign Generator to help you save time and streamline activities, see your Regional Director for more information.)

3. Manage your expectations. Be flexible with your investment minimums. This could lead to sizable accounts in the future – especially if you can encourage making aggressive contributions to both pre-tax and after-tax accounts.

4. Develop a “light touch.” Consider a “service light” model for younger investors. Most are content with, and prefer, online and other electronic communications.

5. Focus on education. Use concerns about the future as leverage to explain long-term benefits of equity investing. Provide a case analysis comparing goal achievement with their current portfolio to a more optimized one. It could prove to be very revealing.

6. Broaden relationships. Younger investors can be uneasy with equity investing because of market volatility. This may have more to do with process and not the product. Consider goals-based investing, managed accounts, alternatives and cash management accounts for the investor that is anxious to hear about something new.

7. Invest in technology. Under-50s expect their service providers to be technologically capable with online investment resources and tools, video conferencing, and social media.

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Is pursuing the Under-50 market right for you and your firm? Only you can decide. However, you need to start giving thought to replacing the assets you will begin losing once your current clients retire and wind down their spending. If you would like more information on the strategies you can utilize in your practice, download our “Opportunities from X to Y” toolkit, which features an article on “Winning the Hearts and Minds of the Under-50 Investor” and a “Quick Guide” to communicating with this market.

Consult with your compliance department about best practices for communicating via social media.

John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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