Journal of Financial Planning: April 2024
Jessica Colston, PCC, is an executive business coach with Carson Coaching. She holds a bachelor’s degree from Grand Valley State University and a master’s in leadership and organizational development from the University of Texas at Dallas. She’s passionate about partnering with firm owners to bridge the gap between their current situation and their desired success. Carson Coaching is the exclusive coaching partner of the Financial Planning Association. For more information, visit www.carsongroup.com/coaching.
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Who is going to have your clients’ assets in 20 years?
Cerulli (2022) says that $84 trillion in assets will transfer by the year 2045 among high-net-worth and ultra-high-net-worth individuals. Cerulli further clarifies that $72.6 trillion of that will be transferred to next-generation heirs (Gen X, Gen Y, and Gen Z) while the rest will be donated to charities.
Furthermore, RIA Intel, reporting data from Cerulli, notes that, generally, Gen X stands to inherit nearly $30 trillion, Gen Y (or millennials) stands to inherit nearly $28 trillion, and Gen Z stands to inherit around $11 trillion (Deaton 2022). Also by 2045, Fidelity (n.d.) estimates that 57 percent of assets will be transferred from financial planners’ clients to their heirs. Yet planners have only reached out to an estimated 13 percent of their clients’ children.
That’s a ton of money in movement in the next 20 years. Your current offering may not appeal to the next generation that values diversity, sustainable investing, and behavioral coaching. If you want to continue to be in business in the next 20 years, you need to adapt to appeal to these generations.
Cerulli (2021) reports that more than 70 percent of next-generation clients will change financial advisers after the great wealth transfer takes place. So we offer you some ideas on how to adjust so you can keep this business.
Establish a Baseline for Your Business
The first step in building your firm to effectively target next-generation clients is to take a moment and assess where you are. The first stop on this journey is to look at your values and goals. Borghesan (2023) reports for InvestmentNews that you should do this to see if your values align with those of next-generation clients (more on that in the next section).
Second, identify whether you have next-generation stakeholders. ThinkAdvisor reports that younger, more culturally diverse clients want planners and advisers who come from similar backgrounds (Comfort 2022). And Edelman Financial Engines (2022) finds that 82 percent of potential clients want people from a similar background advising them on their wealth.
Third, determine whether you’ve done enough to establish trust with next-generation clients through educational content.
Who Is the Next Generation and What Do They Want?
Beresford Research (n.d.) notes that Generation X are those born between the years 1965 and 1980. Pew Research Center notes that millennials are those born between 1981 and 1996, and Gen Y are those born between 1997 and 2012 (Dimock 2023).
When it comes to Gen X, Advisorpedia says that they tend to be more fiscally conservative and are bigger savers than spenders. Retirement is among their top financial goals, and they prioritize financial stability and security (Raynor 2023). The industry tends to ignore this generation, but they need help with milestones like paying for college for their kids, saving for retirement, and taking care of aging parents and children. The older Gen Xers are rapidly approaching the decumulation phase of retirement, but many of them are still in the accumulation phase. In addition, they still have debt in the form of student loans and mortgages.
Advisorpedia reports that Gen X prefers lower-risk investments and, while they are not digital natives like the younger millennials or Gen Zers, they are tech savvy and like to use digital solutions (Raynor 2023).
Fidelity (2023) notes that Gen X is the least confident about their financial futures among all of the generations and need guidance to increase that confidence. Advisers need to get in now as there’s an increasingly narrow window to offer impactful advice.
What Gen X is looking for in their adviser: Fidelity (2023) reports that Gen X wants you to be tech savvy, to help them build their confidence, and to offer services that help them streamline their investing, bill pay, and savings. Plus, they want you to start engaging with their children.
Some millennials are still recovering from the financial setbacks of the Great Recession and are starting to focus more on priorities like buying a home, starting a family, and establishing education savings vehicles for their children, reports CFP Board (2022). Additionally, only 58 percent of millennials are saving for retirement. Fidelity (2024) found that 71 percent of millennials want to consolidate their assets and want to do all their financial business with one company.
Gen Z is diverse, tech-savvy, digitally native, and focused on education and debt repayment. CFP Board (2022) reports that 70 percent of Gen Z workers are saving for retirement, and their spending power is projected to surpass millennials’ income by 2031. Additionally, they are the most diverse and are projected to be the most educated generation yet, and it’s important to them to see themselves reflected in the professionals they work with.
Fidelity found that Gen Y and Gen Z both want behavioral coaching to help them avoid mistakes and bad decisions. Both value a personalized approach to their financial advice, value their communities, want different types of meetings other than just in person, and want to see you active on social media. Contrary to popular belief, both Gen Y and Gen Z value and are receptive to financial advice, but all three generations share that they don’t seek financial advice because they don’t think they have enough assets to manage. Forbes notes that these two generations value sustainable investing vehicles and want to make an impact with their money (Botha 2023).
Strategies to Target the Next Generation
There are several ways to capture and work with next-generation clients—from starting a new firm to attract this target demographic or targeting the children of your current clients. For the purposes of this article, we’re focusing solely on how you can capture the wealth transfer from your ideal clients’ heirs.
Start with identifying your ideal client, which you already have done in your client segmentation. Then you can find the best strategies to build trust with their kids. Here are some suggestions:
Do the Legacy Letter Challenge. Blake Brewer, founder of Legacy Letter Challenge, went on a mission to help a million parents write a “Legacy Letter” to their children after losing his dad on a family vacation in Hawaii. After his dad’s death, his mom gave him a letter his dad had written him. Reading the letter made Brewer feel loved and like his dad was still there for him. Many financial advisers and planners have had their clients do this Legacy Letter Challenge to better connect with their children.1 This challenge is a great way to connect the older generation with the newer generation, create a platform for peace to be made if it needs to be made, and help your clients share their hopes and desires for their kids with them.
Hold a family summit. Mark Kenney, CFP®, CTS, writes in Kiplinger, “The truth about generational wealth transfer planning is that it’s just as much of a family matter as it is a financial one” (Kenney 2023).
As such, you can host a family summit. This isn’t something you do with all your clients, and it goes beyond a typical adviser role and positions you as the trusted professional for your clients’ heirs. In hosting a family summit, you adopt a consultative approach to help your clients pass on their values, purpose, and wealth to the future generations. With a family summit, you effectively take the Legacy Letter Challenge to the next level. Plus, successfully hosting a family summit can add value to your clients’ kids and put you top of mind for them when they need to hire their own adviser (or switch from their current one).
Provide educational content—especially for your clients’ beneficiaries. Providing educational content on your social platforms and then directly to your clients’ beneficiaries can help you connect. Develop and package educational content into snackable pieces of information. Steer clear of longer blogs and articles and stick to social graphics that you can share on your social platforms and email to beneficiaries. Being active and sharing valuable information on social is especially important when it comes to connecting with Gen Y and Gen Z.
Specialize in an area that’s important to next-generation clients. Getting a specific designation to help with issues important to next-gen clients can give you an in. The Education Data Initiative reports that Gen X has an average of $44,000 in student loan debt, millennials have an average of $33,000, and Gen Z has an average of $14,000 (Hanson 2023). All generations need guidance on student loans. FINRA offers the Certified Student Loan Professional designation for professionals with at least two years of experience in financial services.
Establish a next-generation focus group or advisory council. The best way to find out what next-generation clients want is to ask them. You can put together an advisory council of current next-gen clients (if you have them) or kids of your current clients that meets regularly to provide insight into what they need and want. If the prospect of having regular meetings is intimidating, you can start with a one-time focus group. Either way, ensure you ask questions like:
- What is important to you when it comes to managing your finances?
- What kind of services are you looking for from a financial adviser?
Onboard associate advisers in your target markets. Gen Y and Gen Z are the most diverse generations ever. We’re going from the boomers, 18 percent of whom identified as non-White, to these two generations who collectively identify as more than 50 percent non-White (Cerulli 2021). They want to see themselves represented, and they want to work with people like themselves. That is something your firms should be cognizant of and focus on through hiring next-generation talent that younger clients can relate to.
Like Nike, Just Do It
Appealing to these younger clients isn’t something you should put off. The sooner you plant the seed, the sooner you will be able to bear fruit.
You’ll want to start this process by looking at your current firm values and your current client segmentation, then creating a plan to execute keeping in mind what’s important to the different generations. Perhaps you put an associate adviser in charge of implementing the plan to market to and serve these new clients. There’s no time like the present to get started.
Endnote
- Learn more about the Legacy Letter Challenge at www.legacyletterchallenge.com.
References
Beresford Research. n.d. “Generations Defined by Name, Birth Year, and Ages in 2024.” www.beresfordresearch.com/age-range-by-generation/.
Borghesan, Kristian. 2023, April 7. “3 Effective Ways for Advisers to Engage With, and Win Over, the Next Generation.” InvestmentNews. www.investmentnews.com/practice-management/opinion/3-effective-ways-for-advisers-to-engage-with-and-win-over-the-next-generation-235933.
Botha, Francois. 2023, April 27. “Navigating the New Era of Sustainable Investing: How Family Offices Can Adapt to Evolving Regulations and Values.” Forbes. www.forbes.com/sites/francoisbotha/2023/04/27/navigating-the-new-era-of-sustainable-investing-how-family-offices-can-adapt-to-evolving-regulations-and-values/?sh=6deb5d8f60fe.
Cerulli. 2021, July 19. “Aging Boomers Bring Intergenerational Planning to the Forefront.” www.cerulli.com/press-releases/aging-boomers-bring-intergenerational-planning-to-the-forefront.
Cerulli. 2022, January 20. “Cerulli Anticipates $84 Trillion in Wealth Transfers Through 2045.” www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045.
CFP Board. 2022, April 29. “What Financial Planners Should Know About Millennial and Gen Z Clients.” www.cfp.net/knowledge/industry-insights/2022/04/what-financial-planners-should-know-about-millennial-and-gen-z-clients.
Comfort, Rob. 2022, June 30. “Clients are Younger, More Diverse and Want an Advisor to Match.” ThinkAdvisor. www.thinkadvisor.com/2022/06/30/clients-are-younger-more-diverse-and-want-an-advisor-to-match/.
Deaton, Holly. 2022, January 25. “How Advisers Should Prepare for the Clients Inheriting $72.6 Trillion.” RIA Intel. www.riaintel.com/article/2aucrubf4azh6wteoto8w/practice-management/how-advisors-should-prepare-for-the-clients-inheriting-72-6-trillion.
Dimock, Michael. 2019, January 17. “Defining Generations: Where Millennials End and Generation Z Begins.” Pew Research Center. www.pewresearch.org/short-reads/2019/01/17/where-millennials-end-and-generation-z-begins/.
Edelman Financial Engines. 2022, September 28. “Edelman Financial Engines Survey Finds that Inclusivity is Critical to Improving Employee Participation in Financial Wellness Benefits.” www.edelmanfinancialengines.com/press/edelman-financial-engines-survey-finds-that-inclusivity-is-critical-to-improving-employee-participation-in-financial-wellness-benefits/.
Fidelity. n.d. “Insights to Help you Serve Young Investors.” www.clearingcustody.fidelity.com/app/item/RD_9890070/insights-to-help-you-serve-young-investors.html.
Fidelity. 2023. “Gen X: A Mature Market That’s Often Overlooked.” www.clearingcustody.fidelity.com/app/proxy/content?literatureURL=/9910832.PDF.
Fidelity. 2024. “It’s Time to Change Your Mind about Young Investors.” www.clearingcustody.fidelity.com/app/proxy/content?literatureURL=/9907600.PDF.
Hanson, Melanie. 2023, September 24. “Student Loan Debt by Generation.” Education Data Initiative. www.educationdata.org/student-loan-debt-by-generation.
Kenney, Mark. 2023, July 8. “Gen X Should Prepare Now for the Great Wealth Transfer.” Kiplinger. www.kiplinger.com/retirement/great-wealth-transfer-gen-x-should-prepare.
Raynor, Lilah. 2023, April 27. “The Financial Profile of Generation X.” Advisorpedia. www.advisorpedia.com/research/the-financial-profile-of-generation-x/.