Intergenerational advice and engaging younger clients

5 min read 1 Oct 20

The rise of intergenerational wealth transfers presents an opportunity for advisers to build relationships with a younger generation of clients – an area of the market which has previously proven a tough nut to crack. But even in this situation, some of the challenges of engaging tech-savvy younger clients with financial advice still very much applies. This article gives some food for thought and explores simple tips that can help advisers cut through, regardless of whether technology is your thing or not.

Rise of inheritance

Inheritance between different family generations is set to soar in the UK as a result of the wealth accumulated by the baby boomer generation, although a lot of research shows that inheritors may opt to end the relationship with their donor’s adviser once this money has been passed down. The reason for younger generations wanting to go elsewhere is often attributed to their higher expectations in terms of online accessibility, real-time information and digital technology.

However, it’s by no means certain that advisers will lose out on the opportunity presented by growing intergenerational wealth. In fact, it could be part of the solution to engaging younger clients. The rising wall of money waiting to be passed down is prompting more people to seek financial advice for multiple generations in their family, providing an ideal first step for advisers to start building relationships and servicing younger generations. Nonetheless, the types of apps and technology that these clients are likely to be familiar with will mean they can still have quite different expectations about how they want to approach their savings and investments as part of a financial plan.

Look beyond the technology

The good news is that tackling this issue doesn’t necessarily have to mean building your own app or adopting expensive technology. In fact, the key here is to look beyond the technology itself and focus instead on the types of behaviour that it can encourage. ‘Nudges’ are just one example of a behaviour that this technology actively promotes, namely through positive reinforcement, to help people feel informed and engaged with their finances. You may even recognise this type of behaviour from some of the services and communication you already use with existing clients, although technology arguably allows this to go a step further by upping the frequency and level of personalisation of these nudges. Again, you don’t necessarily need an app to replicate this. Many advisers have been talking about the additional direct and personal communication they have had with clients during the coronavirus pandemic. And there are ways to build on this, perhaps by introducing a text message service or light-touch reminders and updates to help keep younger clients engaged and on track with their agreed financial plan.

Make the future relevant to the here and now

Another behaviour which is often associated with younger generations, and has almost certainly been exacerbated by technology, is a tendency to want everything, now. In other words, instant gratification. At first, this may seem a tricky one for advisers to manage because so much of saving and investing requires a focus on the long-term – there’s really no getting away from that. But one answer to this is to think of ways that encourage a younger client to really put themselves in the shoes of their future self, which will in turn satisfy the sense of being informed, in control and engaged that comes with instant gratification.

A lot of this can begin to come about naturally as part of holistic financial planning, when building a broader picture of a clients’ aspirations, and it may also be that you have tools or innovative services that you use elsewhere in your firm which could be adapted for this very purpose. For example, in late 2019 we spoke to a number of advisers about new and innovative ways they are working with clients in retirement. One adviser described a mind mapping tool they use with clients to put in place a strategy and to help them understand how their income will work. Another told us about a new coaching method their firm was introducing for retirement clients, based around the ‘Four Freedoms’ (money, time, relationships and health), to encourage them to think ahead. And there’s no reason why these types of ideas couldn’t work equally well as personal, stimulating and flexible ways to get younger clients to clearly visualise where they want to be in the long-term and how they’ll get there.

Engaging the next generation with financial advice is a broad topic and there are wider issues at play which can also create barriers but the takeaways from this article have focused on:

  • Rising demand for intergenerational advice can open the door for advisers to work with younger clients but it also means that now is the time to act on changes you may need to make, to ensure these relationships stick.
  • Adopting technology isn’t your only option. Try thinking about the behaviours that technology encourages – does your firm use or deal with similar behaviours and, if so, how could this be adapted for younger clients?
  • Engaging younger clients is ultimately an investment in the long-term future of your advice firm but even some of the simple changes needed to make this happen will inevitably ask more of adviser firms, so you may need to assess the impact this will have on resources, time and costs.

Doing what you do best - engaging with your clients which ever generation may just mean finding the right solution for you that doesn’t become all time consuming. Our recent research highlighted some of the alternatives that adviser have used to engage with clients around making the future relevant.

The subject of intergenerational wealth is also wide ranging and we explore some of the different aspects of this trend in our recent article looking at the shifting fortunes of different family generations and their finances. And, we also take a technical look at how pension death benefits can be used as a source of intergenerational income – provided advisers and clients get the detail right.