YOUR PRACTICE-Collaborate to win younger clients

CHICAGO Mon Jan 6, 2014 9:00am EST

CHICAGO Jan 6 (Reuters) - They don't care where you went to school or what certificates hang on your wall. But once you win them over, wealthy young clients may be your biggest advocates and your best customers.

Financial industry professionals say Generation Y clients - the "millennials" born after 1982 - can be tough nuts to crack. Connecting with them requires a willingness to abandon the tried-and-true formulas that worked for baby boomers who wanted investment strategies spelled out for them. Instead, you must be willing to try to solve many of their financial problems, beyond investing, and you have to bring them into the process more directly.

"What they care about is if you're going to bring them some clarity - and be a partner and resource to them forever," says Mitch Reiner, a 32-year-old financial adviser in Atlanta who is part of a team managing total assets of nearly $1.4 billion.

SWEAT THE SMALL STUFF

Among millionaires in the Gen X and Gen Y age group - which stretches back to people born after 1965 - 61 percent are likely to perform their own investment research, according to a 2013 study by Fidelity Investments. Only 6 percent of high-net-worth investors in that group delegate their financial decisions to an adviser, compared with 20 percent of baby boomers.

So how can financial advisers win over these well-informed do-it-yourselfers? One way is by overseeing as many details of their financial lives as possible, says Jylanne Dunn, senior vice president for practice management for Fidelity.

Fidelity's research on younger clients found an overwhelming desire to use advisers who can serve as a one-stop-shop for their comprehensive financial needs, not just planning. Younger clients look for advisers who can offer expertise and referrals on everything from insurance to estate planning. At the same time, they wanted to collaborate throughout the process.

"You're going to have to let them drive the pace at which the conversations will go," Dunn says. "Don't try to put them in the same box as the boomers."

EXPECT THE TEXT

Because Gen Yers exert more control over their portfolios, they demand faster response times, Dunn adds.

"They want to be able to text you when they have a question and get a response back," she says.

It helps to match younger clients with advisers who can directly relate to their life experiences. At the least, invite an adviser in the client's age bracket to be part of the service team, says Jennifer Geoghegan, a practice management expert with Focus Financial Partners, a nationwide group of independent firms.

"In their day-to-day interactions, they will probably want to interact with the younger advisers who are closer to their life stage," she says.

To attract younger clients, Patricia Raskob, a longtime Tucson-based financial adviser and grandmother of 10, has been adding staff members in their 30s. Since September, she's also enlisted the services of a social media expert to write blogs and boost the firm's presence on LinkedIn. Younger prospects seem to be tuning in, she says.

"We get calls, and we've been doing a lot of first appointments at no charge," says Raskob, whose staff of 12 full-timers has about $155 million under management.

LOOSEN UP

To be sure, when you're dealing with young clients who have more modest nest eggs than early-stage millionaires, it may help to ease the rules a bit, lifting criteria for minimum investment or otherwise offering incentives that can lure the budget-constrained to your door.

"I have very transparent hourly-based pricing," says Justin Nichols, a financial planner in Manhattan, Kansas, who works mainly with professionals in their 30s and 40s and advertises that his first-time services that will be "less than your monthly cable bill." "I think they like the idea of the transparency."

Nichols, like many advisers dealing with younger investors, is also big on technology, meeting with more than 70 percent of his clients virtually with the help of cloud-based tools.

Many times they come to him seeking validation of their own financial decisions and ask questions like, "Are we on the right track? Do we have enough insurance? Help me choose the right investment for my 401(k)," he says.

NOT YOUR FATHER'S FUND

Younger investors may also have a different idea of what constitutes an attractive investment opportunity than their older counterparts, says Barbara Young of San Francisco-based Cypress Wealth Advisors.

The passive, index-driven approach of exchange-traded funds, for one, can be a turn-off to the young Silicon Valley investors she caters to because many of them amassed their wealth from tech startups. Instead, they want access to private stock offerings on early-stage concepts with the potential for big rewards. Young comes to meetings prepared to help assess the risk associated with those ideas.

"They don't want to go into the big fund," says Young, whose firm manages almost $1 billion. "They want private equity, interesting deals they can understand."

Of course, there is no preset formula for dealing with any age group. But with younger clients, there are some general pitfalls to avoid. Whatever you do, don't patronize them, says Focus Financial's Geoghegan.

"They don't want to be talked down to by their parents' adviser," she says. "Just because they don't have the wealth today doesn't mean they're not smart and motivated and willing to learn." Nor does it mean they won't have wealth tomorrow.

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