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The clients of the future are Gen X and Gen Y. But most advisors are boomers and they’ll be the ones forced to change their ways.

By Bill Willis

September 1, 2010

You might be surprised to learn that the average age of a financial advisor is approximately 55. So many of your peers are baby boomers who have typically built their businesses marketing initially to their parents’ generation (the traditionalists), and then to fellow boomers. As the traditionalists face the sunset and boomers embrace retirement, it seems essential that brokerage firms and their advisors turn their focus to Generations X and Y.

These younger generations are both today’s clients and those of the future. We all know of young people who have made fortunes in technology and other endeavors. Are you equipped to connect with these opportunities? In your own world, the children of your best clients will eventually control the assets of their families. Have you and your firm developed a game plan for meeting and relating to these young people?

The family office concept was developed in part to embrace the multi-generational relationships. Whether in a single or multi-family office, the financial advisor is positioned as a steward for the family’s wealth. It is incumbent on these advisors to develop meaningful relationships with all members of the family.

Firms or divisions of firms that cater exclusively to high-net-worth clients are actively marketing to Gen X and Gen Y. Many of the firms orchestrate activities attempting to leverage their relationship with their wealthy clients. One well known boutique holds outings for the next generations where economics and finance are discussed and networking encouraged. As you might imagine, these types of activities help bond these Gen X and Gen Y offspring to the advisor and firm. Most high-net-worth advisors deal with a few (less than 50) very wealthy families, making it financially feasible for their firms to offer such programs. However, the economics are different at the wirehouses.

Obviously, the wirehouses employ many more reps who typically have hundreds of relationships. As such, it is not practical to offer high-end conferences to all the families. But the leaders of these firms recognize the need to embrace Gen X and Gen Y, and we have recently been made aware of specific training. One of the big four has been employing generational guru, Anne Loehr to help their advisors become more knowledgeable and effective in dealing with various generations. Her goal is to share her unique insights into leveraging the four generations and give her clients a leading edge in business.

She speaks to advisor groups around the country about the four generations: traditionalists (born 1922-1945), baby boomers (1946-1964), Generation X (1965-1980), and Generation Y (1981-2001).

She lectures on the life-shaping events and characteristics unique to each of the four. She then helps her audiences understand the different words that work with each generation. She tells us that for traditionalist group the life-shaping events where WWII, The Great Depression and President Franklin D. Roosevelt. Their characteristics are fiscal conservatism, discipline, loyalty, patriotism, and aversion to risk. She says words that work with this group include reliable, duty, value, loyalty and discipline.

The life-shaping events for boomers, according to Loehr, were the moon landing, civil rights, the Vietnam War, Woodstock, and the Pill. She characterizes boomers as idealistic, optimistic, team-focused, politically correct and trying to make a difference. Her words that work with this group are we, team, giving back, independence, creativity and freedom.

Most of you have successfully related to these two generations throughout your careers. You are probably not surprised by these facts, and even aware of them on some level. But how many of you feel as confident about your understanding and ability to effectively interact with Gen X and Y?

If you want to maintain or grow your business, it is important that you sharpen your Gen X and Y marketing skills. Gen Xers came of age in the aftermath of Watergate and they often do not trust the government, or their families, to look after them. Big events in their lives include the Challenger explosion and the launch of MTV. They tend to be self-sufficient and results-driven. Gen Yers have been “wired” their entire lives. They expect everything to be downloaded immediately. They value connections, and want to be part of a community, according to Loehr.

It is logical that major new wealth and associated growth opportunities will spring from the younger generations. Further, it is obvious that they will inherit their family’s wealth, thus making good relationships a necessity to maintaining your assets. So how does one develop this expertise?

The facts are important, but a serious and respectful approach is essential. Let’s be honest, it’s not easy for all of us to take the actions and ideas of younger people as seriously as our peer or seniors.

When I was a new, 22-year-old financial consultant (many years ago), my target market was the traditionalist. My success hinged on my ability to understand and communicate credibly with that generation. Like any good salesperson, I became knowledgeable and respectful. But this is a new day, so are you willing to approach X and Y with a similar resolve?

Certainly, Loehr’s insights into Generations X and Y would be a starting point.

In addition, your firm will attempt to help you. They know that at the very least inherited assets need to be more sticky, so expect a wide range of training opportunities focused on X and Y. Some firms I have checked with have multi-generational events, but because of budgetary constraints, these are reserved for only the largest clients.

Now that training programs have reopened, one would think that wirehouses have an opportunity to hire Xs and eventually Ys who will relate to their peers naturally. Unfortunately, it seems the target hire is the same old profile. Everyone seems to be looking for a second- career person with heavy sales experience and an established network of influence. That person is probably closer to 40 than 30.

Why not hire some outstanding young people into the training programs and have them embedded in established teams? They could learn from the senior team members and serve as a liaison to the younger generations.

We, and our firms, tend to get caught up in the near-term, sometimes leaving project like planning for the younger generations to tomorrow. Beware, when your largest client suddenly dies, tomorrow is today.