Meaningful engagement requires outreach, listening and understanding
by Julia BartakMs. Bartak is an Edward Jones Financial Advisor based in the Kansas City area. Visit www.edwardjones.com.
One of the biggest growth opportunities financial advisors have involves engaging the next generation of investors. Compared to previous generations, this group tends to be largely untapped, and younger investors likely have a great deal of upside earning potential and many years to realize and achieve their financial goals.
But engaging this group is not without its challenges. Many in the next generation of investors aren’t yet working with a financial advisor. Whether it’s because they are unwilling – or feel unprepared – there are a number of reasons they aren’t seeking financial advice from a professional.
Recognizing both the opportunities and challenges inherent with working with younger investors, my firm has invested in research to better understand this group to determine how best to engage them and help them achieve their goals. Sharing our insights with the industry is in keeping with our values and purpose, which is to improve the lives of our clients and colleagues, and together, better our communities and society.
Our firm conducted two key studies in 2023 – the first surveyed adults 18-34, which we have defined as GenNext, and the second queried 200 financial advisors about their clients in this age group. Combined, these surveys provide great insights into GenNext’s desires, hopes and fears, as well as the viewpoint of advisors regarding best practices for engaging this group.
We know from our research that members of GenNext consider wealth more in terms of comfort than luxury. They want to be comfortable or have enough money to have a meaningful life, but they aren’t as concerned with financial accumulation or career in the same way their parents, grandparents, or even older siblings may be. Instead of climbing the traditional career ladder, GenNext has shown to be more comfortable with change. Employer loyalty is less important to this group, and they tend to be highly mobile and move from one job to another.
And despite the stereotypes that may come along with this presumed lack of loyalty, GenNext is hardworking, ambitious and navigating the uncertainty that goes both with their life stage and the social and economic challenges today. To help meet these challenges, GenNext is comfortable wearing multiple hats, with many looking to ‘side hustles’ to fund their lifestyles outside of basic expenses.
Financial advisors we surveyed told us this group hopes to retire at 61 – a full three years ahead of clients ages 35-64 – but they haven’t started planning for retirement yet. Rather, their GenNext clients are prioritizing other aspects of their lives including planning for a family (30%), being responsible for everyday expenses (28%) and investing (23%).
Perhaps surprisingly to some, their GenNext clients are experiencing or aspiring to experience traditional life events, such as marriage, home ownership or having children, so there is an opportunity for financial advisors to help these clients set and reach goals across their lifespan.
Opportunity To Engage
Yet only 12% of GenNext respondents discuss their finances with a financial advisor today, with 68% of respondents believing they don’t have enough income or savings to seek professional financial advice.
While this lack of engagement by potential GenNext clients presents a challenge for our industry, our research also revealed opportunities when it comes to the potential positive impact a financial advisor can have on this group of investors.
When comparing their conversations with clients in the same age range a decade ago, financial advisors across the industry say GenNext are now in a more favorable position regarding their financial stability.
It’s important to remember this group has more access to – and more sources of – information than any group before them, having grown up with the internet at their fingertips.
And despite growing up digital-first, GenNext does value face-to-face connections – including in the financial advisor relationship. Our GenNext study showed 66% of those GenNext respondents who have a financial advisor preferred in-person interactions with them. And while 78% of GenNext respondents don’t currently work with a financial advisor, 41% say they plan to someday.
What GenNext truly needs is someone they can trust to help consolidate and digest information and help them put together a plan for long-term financial success. This is good news for financial advisors!
Still, there are a lot of contradictions financial advisors should be aware of when it comes to GenNext: they want to retire early, but they aren’t prioritizing saving for retirement yet. They are still interested in saving long-term, but they have a short-term mindset when it comes to finance. They are thriving and saving well, but according to the financial advisors we surveyed, they’re just not focused on the right things. They are budgeting and saving for short-term spending, but they often don’t have a plan for the long-term.
These are contradictions, but also commonalities I observe in my practice. Often, I see younger investors who could use guidance on how to focus their financial strategy on the right things. For instance, they may overpay on their mortgage instead of paying down high-interest student debt. A financial advisor can help GenNext clients think about emergency savings, prioritize debt and better understand budgeting and expenses, while counseling them about the tools available to help.
The key to success with GenNext clients starts with helping them develop a strategy for how to approach all their short-term plans. Anyone faced with too much information and too many conflicting goals is likely not to address any of them without guidance. Financial advisors have an opportunity to help GenNext investors make sense of the various and seemingly conflicting information and pressures they encounter.
Perhaps more importantly, we, as financial advisors, have an opportunity to positively impact GenNext’s sense of mental and financial well-being. Our research shows how much GenNext Values mental health, as evidenced by their willingness to invest in self-care. Providing sound, trusted financial guidance and helping them set – and meet – long-term financial goals is an important component of achieving a sense of both financial and emotional well-being.
We simply need to first listen to understand their priorities. I haven’t gotten much resistance in my experience with my GenNext clients. Most feel good having a plan in place. Once they have a budget, they are more secure in how much they can spend, and they become comfortable with the long-term plan. If they have a lot of debt to pay off, I acknowledge the challenge and help them buckle down. When you listen intently to them, you can gauge their commitment to retirement, among other long-term financial goals.
The key is finding a way to start the conversation. For me, many potential GenNext investors tend to be the children or grandchildren of current clients. Since many don’t feel they have enough assets for professional advice, they are not likely to reach out to a financial advisor, so the most effective method of engagement is reaching out and calling them. I’ve been surprised by the number of children and grandchildren of current clients who really needed – and welcomed – my help. They know they need assistance or guidance, but all too often they don’t know how to get it or don’t know where to start.
The bottom line is what’s important for GenNext is the same as it has been for the generations who have preceded them: to develop a deep personal relationship and a solid foundation of trust with their financial advisor as a guide to help them achieve their long-term financial goals.
It starts with reaching out and making that call.