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Why it is worth going the extra mile to sign up younger clients

Why it is worth going the extra mile to sign up younger clients

Advisers who overlook younger clients because they are less profitable ignore the fact their incomes will rise and there is potential for a long-lasting profitable relationship, writes Robert Forbes of Plutus Wealth Management.

It has been said that younger clients are unprofitable and difficult to work with. It has been said so many times, you could be forgiven for believing it was true. Fortunately, the reality is far removed from the cliche.

It is not the age of a client that is important, it is their outlook on life, their aspirations and the adviser’s fee model and efficiency. Without a fully engaged client working with an efficient adviser practice, none of this works, and that is true for any client of any age.

Why attract young clients?

The positive aspects of a younger client base are numerous. It is a less-crowded space and, with a judicious approach to who is taken on board, the adviser can cultivate client relationships that could last 50 years or more.

Younger clients tend to be new to financial planning and have not been exposed to some of the sharp practices that may have occurred in the past. Also we do not have to countenance a discussion about commission versus fees; it is simply a case of outlining how we work and charging in the appropriate manner.

On the downside, younger clients will have less assets than older clients. However, even if they are less profitable initially, that does not necessarily mean they are less valuable.

I have heard advisers cite a lack of empathy with younger clients as a reason for not working with them. I don’t buy into that idea. The belief that an adviser needs to be of a similar age to a client to engage fully with them is piffle. Competence and adding value are what matter.

The same language

Advisers should communicate with younger clients in much the same way as with older ones: use the technology at hand but never forget it is the personal service that creates the implicit trust.

We use Twitter and Facebook as part of our social media strategy but, ultimately, good old-fashioned direct contact is appreciated by young and old.

Are younger people turned off by pensions? No more than anyone else, and there are always other options to consider. But, unless someone believes their time is not going to stretch into their 60s at least (and who would want such a negative client?), pensions are a tool we always use.

Different priorities

When dealing with younger clients, there are often priorities other than pensions that require extensive planning, the obvious examples being house buying and children. This reinforces our relationship as we work with them to navigate through their life events in an orderly fashion.

What about implementation of advice where sums are small? UK advisers work in myriad ways, but what works well for us is charging a monthly fee so we do not have to be rigid over minimum investable amounts. Moreover, as we become progressively more efficient with our internal processes, it becomes less and less of an issue.

What kind of questions do younger clients ask? We spend a lot of time talking to them about inflation risk and time frames, in part to bring the planning work to life.

Often younger clients have not yet had children, so their perspectives are different from those of older clients. They will want to know the relative merits of the different options they have and we will explain these in great detail. Often these clients want to know the nuts and bolts of their plan.

They also expect information that is immediately available and up to date. So do we. Their demands have driven improvements in our efficiency and the older clients benefit as a result.

The majority of our advice is liability and target driven, which means in the short term the younger client is much less concerned about relative performance than perhaps an older one. This has its advantages and disadvantages. The main advantage being that they will not be worrying about their future so much.

Business only

We originally intended to hold regular events for clients so they could get to know each other and as a way of adding more value. However, the results of a client survey showed they had no appetite for contrived social events and that, although they were happy to spend time with their adviser, they regarded the firm as a place for advice rather than a social outlet.

We took this on board and in the past year have held occasional seminars for younger clients to address some of the issues they will face in the coming years, such as house purchases, providing for children, the cost of marriage and so on.

All in all, if the advice process is slick enough and the attitude of the adviser appropriately attuned, younger clients are brilliant to work with. Their greatest benefit, though, is not their rising incomes, their willingness to engage or their retainability as clients; but that, when all is said and done, they will be around for a lot longer than older clients.

Robert Forbes is an independent financial planner at Plutus Wealth Management.

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