Wealth Management: Two Ways to Appeal to Gen X and Y Clients

Although many governments may be exhorting their younger citizens to start saving for their pensions now, wealth management advisors tend to focus most of their time and attention on the older groups in society. This is for the sensible reason that they have most of the wealth, but it’s not a good long-term strategy.

A lot of the media coverage of how generations X (those born between mid 1960s and the late 70s) and Y (or millennials – those born between the early 80s and the early 2000s) manage their wealth has focused on their mistrust of financial institutions and the emerging threat of robo-competitors. And, while these might pose some problems, what should really be worrying executives running wealth management firms is the quality of the advisory relationship that younger clients enjoy.

Generation X/Y clients lag their baby boomer and senior counterparts in engagement with wealth firm products and services, satisfaction with advisors and firms, and overall wallet share at their primary firm. These results bode poorly for growth of future advisory relationships, whether firms are bringing on new clients or dealing with those who have recently inherited wealth. Roughly one-in-five clients in these younger age cohorts plan to reduce assets with their firm in the near-term.

In a service and advisory model built for the baby boomer generation (which still accounts for a majority of firms’ client base), inconsistency in the quality of advice may be hindering relationships. Younger clients receive less detailed account reviews, with infrequent use of written recommendations, portfolio analysis, and reporting on progress toward financial goals, according to CEB data.

Those that are less satisfied are also more likely to report fragmented advisory relationships split across multiple providers, and often lack a strong advisor as the point of contact to manage – and grow – the relationship.

Two Opportunities

Firms should think about two opportunities for reversing this trend and winning over generation X and Y clients.

1. Provide a holistic advisory experience that tailors, teaches, and motivates action: According to CEB data, clients most value their advisor’s ability to tailor advice to their unique financial needs and, second, that motivate them to take action. Firms that move from a “good” to an “excellent” rating on clients’ feedback see increases of 13% in wallet share if they tailor advice and a 12% boost if they motivate clients to manage their finances.

   Receiving “holistic” advice (advice on all aspects of wealth management) matters even more to younger clients: 80% of those receiving holistic advice are highly satisfied (compared to only a quarter of those who don’t receive that kind of advice).

2. Provide online services with accurate, comprehensive, and relevant view of a client’s portfolio: The same data show that clients also value a wealth management website that aggregates all their accounts together and reports changes to their investments in real time. Firms that moved a “good” to a “very good” rating saw wallet share increases of 14% and 7% respectively for providing these capabilities.

   For more progressive firms, moving from a “very good” to an “excellent” rating for two things – making a client’s online account reflect advice already provided in a conversation with an advisor, and the breadth of the online capabilities provided – were both associated with 10% wallet share increases.