As if wealth management firms didn’t already have enough to contend with in terms of challengers, consolidation and compliance, they are also adjusting to the characteristics of the client marketplace itself, as the future of organic growth is hinged to the financial rise of Millennials—quite possibly the greatest generation of investors yet. However, attracting an age cohort that perceives retirement as unattainable (83% to be exact) and the equities market as inherently rigged—spawned by the Great Recession—is proving quite difficult for an industry that is predicated on leveraging the actuality of both of those elements, not to mention historically resistant to messaging and model changes. And why not? Both have worked incredibly well as is for decades.
But as much of the financial services literature on millennial behavior and psychology has urged, traditional thought, process and strategy must evolve, or perish in the wake of a generation with the highest percentage of billionaires. So how do wealth firms start redeveloping their narrative and operational standards? By hiring Millennials to replace retiring advisors, of course.
A Changing of the Fiduciary Guard, Who Also Volunteers at a Food Pantry
With an average age of 51, many wealth advisors are approaching retirement. Therefore, change begins by recruiting millennial replacements, and it ends with those new fiduciaries advising their peers, thereby replenishing the evaporating pool of baby boomer investors. In order for this to happen, however, firms must realize that budding advisors see philanthropy as more than a nice-to-have benefit; it should be a pillar of business policy.
From charitable donation matching to dedicated volunteer hours to event sponsorships to generosity summits—where clients are connected to advisors and community members to learn more about philanthropic methods and options—firms are investing in the initiatives of their millennial employees, experiencing first-hand the level of organizational pride and commitment such a policy yields.
“Millennials want to work hard, give back and work somewhere that supports them and their causes,” said Steven Elwell of Level Financial Advisors Inc. to The Wall Street Journal.
This impassioned inclination is a common thread that weaves millennial advisors and clients together. Impact investing (coined by The Rockefeller Foundation in 2007) or socially responsible investing puts a name to investments made with the intention of generating both a financial return and social and/or environmental impact and is now mainstream among investors, particularly Millennials. It is up to firms to genuinely embrace and effectively execute such strategies, and this begins by building strong, personal relationships with millennial clients, achieving their goals through advocacy, and not just facilitation.
My Robo Just Gets Me
Why the haste? Because, as one might expect, robo advisors are already filling this void at a fraction of the fees that traditional advisors require. “We’re constantly meeting people who asked their advisor about socially responsible investing, but they didn’t know about it or said they don’t recommend it,” said Joshua Levin, co-founder of OpenInvest, to InvestmentNews.
Platforms like OpenInvest, Earthfolio and Grow Invest are working with socially conscious investors to make a positive impact on the world. By melding philanthropic interests and societal concerns with investment risk characteristics, each platform can recommend and allocate dollars to an ETF, stock or mutual fund portfolio, satisfying a client’s demand for impact investing.
But what’s critical for the future of robos and human advisors alike, more so than satisfying expectations at a lower cost, is the acquisition of knowledge, the ability to further personalize the client experience. With these rather intimate inputs, just imagine what the next-generation of robo advisors, the ones equipped with robust AI, will be able to accomplish for investors.
“The robo demographic tends to be Millennials and there’s an enormous appetite there for sustainable investing,” added Art Tabuenca, founder of EarthFolio.
Traditional wealth management firms need to appeal to millennial investors by speaking specifically and emphatically to their goals and dreams, financial and personal. Tailoring conversations to a client’s desire for social responsibility is a component of this experience initiative, and should be executed in part by younger advisors who share similar values and perspectives. And since they’re tech savvy as well, leveraging sales enablement platforms that can deliver these types of customized and compliant messaging and advisory services is a step in the right direction for capturing the millennial market, achieving organic growth and defending against the continued expansion of robo platforms and their capabilities.