How advice firms should attract millennial clients

03 Apr 2023

Third Financial featured in today's International Adviser and Portfolio Adviser, discussing what's required to attract and retain the next generation of clients - and colleagues.  Read the articles here:  International Adviser / Portfolio Adviser.




How advice firms should attract millennial clients
They need to start future-proofing the business

The millennial generation in the UK is facing a difficult financial future. They are the first generation in modern history likely to be worse off financially than their parents were at similar stages of life – an unenviable record to set, writes Ian Partington, chief executive of Third Financial.

This can largely be attributed to high property prices that lock them out of the housing market, the need to incur significant debt for a degree to compete in the job market, and a stagnant economy with relatively high taxes.

Moreover, millennials – defined as those born between 1980 and 1995 – are contending with lower returns on savings and investments compared to their parents’ generation. While the early 80s brought 15% yields on five-year US government bonds, today this has dropped to about 4%. The S&P 500 also traded at a price-to-earnings ratio of around eight in the early 1980s, while it now trades at around 22. In other words, both bonds and shares are far more expensive today than when baby boomers were young professionals with money to invest.

To add to this challenging situation, inflation is back, interest rates are rising, and populations in the developed world are ageing, making it difficult for millennials to build a solid financial future. Financial advisers must recognise that their millennial clients require a different style of advice than previous generations – and it’s their contemporaries who are likely to be best-placed to understand their perspective and provide this advice sensitively.

Financial advisers and wealth managers are prone to hand wringing over how to appeal to younger people – including those from fortunate families with assets and investment accounts to pass down. Our own clients rightly want to know how our offering will improve their client-facing technology. But what can often be overlooked is that a modern technology stack is vital in attracting and retaining the next generation of financial advisers.

Data from the Financial Conduct Authority (FCA) reveals that only 23% of financial advisers are under 40, while about half are over 50, indicating that many advisers are set to retire in the coming years.The advice businesses that thrive longer-term will be those that can mirror the families they work with. And millennials, who are digital natives, demand cutting-edge technology to do their jobs efficiently. They are accustomed to user-friendly and intuitive technology like Uber, Monzo, and Apple, and any system that is not completely seamless is considered unacceptably cumbersome. Advisers must adopt modern technology to reduce the administrative burden and allow more time to focus on excellent client service. This will not only attract and retain younger advisers and clients but also future-proof the advice business.

Meanwhile, the advice sector is facing challenges including fee pressure, rising costs, and further layers of regulation. This comes atop a cost-of-living crisis that is increasing drawdowns and impacting client sentiment. I believe this means the best course of action is to adopt modern technology to reduce the administrative burden, leaving more time to focus on a much more rewarding task: providing excellent client service.

Firms looking to recruit the best talent and to scale their businesses need to simplify their operating models and future-proof their technology stacks, meaning new colleagues and clients – especially the next generation – are attracted and retained.

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