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The Clients of the Future

Want to target younger prospects? Here's what they're looking for.

By David Connell

Most financial advisors believe that clients who are 40 years old or younger aren’t worth their time or energy because they have no money to invest, no interest in financial products and no time to listen to an advisor’s advice. Because of this misconception, this market remains woefully underserved and in need of advisors’ attention. Young professionals are not only worth pursuing; they will be a key component to your future business.

AdvisorToday talked with a handful of young professionals from around the country to gauge their attitudes about financial planning. We chose a mix of men and women who are all professionals with college or graduate degrees. Some are married, some are homeowners, but none have children. What we found is a group of people who know the importance of planning, but need serious education when it comes to exploring all of their available options—particularly insurance-based options.

Finding an advisor
Of those we talked to who have financial advisors, two use advisors that their parents recommended to them, and one uses an advisor her credit union provided—in this case USAA. Anecdotally, this indicates that advisors can secure new clients by marketing to the children of their better clients, or setting up seminars specifically geared toward clients’ adult children.

Those who don’t have advisors say they would consider hiring one in the near future, but most also say they are wary of finding an advisor strictly through advertising. In fact, many say they are put off by traditional prospecting methods like print advertising and direct mail.

“We’ve often considered hiring [a financial advisor], but haven’t taken the time to find one yet,” says Tiffany Aukema, a human resources project manager with MCI. “It’s doubtful I would select an advisor based on an advertisement, though. If I could research advisors using an unbiased publication, I would.”

Aukema is an ideal client. She and her husband are interested in retirement, higher education savings and are considering purchasing their second home. She says she “revisits the issue of hiring an advisor every six months or so,” but has yet to contact one.

Other young professionals say they would seek referrals from friends and colleagues when searching for an advisor, suggesting that those who take the time to explore this market could be flooded with referrals.

The beginnings of a plan
All of the young professionals we spoke with are starting to build a long-term financial plan. They contribute regularly to their 401(k) program; some say they have Roth IRAs and others are investing in mutual funds. Some even exhibited sophisticated thinking about their investment strategy.

“I think we save more than most people our age,” Amanda Rogos, a Freddie Mac loan prospector, says. “We review our budget every three months and our investing pattern yearly. Last year we made some major changes to decrease the number of mutual funds we had and to make sure they were balanced for growth, value and income.”

The need for education
While all of these under-35 folks are educated on basic savings vehicles, none are familiar with long-term, insurance-based financial planning options. Only one of those interviewed knew about universal life products or annuities. While some have a vague notion of long-term care insurance, none have any plans to look into the product any time soon.

All of those we talked to are a bit naïve regarding how much they need for retirement. Most say they are preparing for retirement, but cited only 401(k) and IRA savings as the basis for that planning.

“I can honestly say I am saving for retirement,” Aukema says. “I have contributed money consistently to my 401(k) plan since I graduated from college and have increased my contribution percentage as my salary has increased through the years.”

Clearly, those advisors who pursue the under-40 market will find clients who are willing to invest, but need a reality check when it comes to what is necessary to build a comprehensive long-term financial plan.

They will also find clients that are confused and frustrated with the financial planning process. This frustration, coupled with a lack of time to research their planning options, can cause many younger clients to simply throw up their hands and put off finding advice.

“The problem is really getting a handle on what is available and what needs to be done to actively pursue benefits,” Dr. Richard Pineda, a communications studies professor at California State University at San Bernardino, says of his own financial planning woes. “I feel like this is an area that is hard to understand.”

It’s true that many young professionals have not accumulated the wealth of traditional clients, but there is still some money to be made in this market. If advisors are willing to take the time to find younger clients, listen to their concerns and get them on the road to financial independence, they will find engaged, intelligent and, most importantly, long-term clients who can form the basis of a practice for years to come.


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