Focusing on the next wave of clients

Advisers and planners must make it their business to understand the characteristics and mind-set of Generation Y.

Advisers and planners must make it their business to understand the characteristics and mind-set of Generation Y. Born between 1982 and 1995, these young adults already are having a huge effect on the U.S. economy. To thrive rather than merely survive, financial planners and advisers must treat the cultivation of Generation Y as a high priority.

If you think Gen Yers are too young and not affluent enough to be an important opportunity for your business, guess again. This group of 80 million spends more than $170 billion a year of their own and their parents’ money, and they have $40 billion in savings.

Their attitudes and values should be a major consideration when developing marketing programs to attract new business.

Unfortunately, while many Gen Yers would benefit from professional help in financial planning, they tend to view the industry with skepticism, according to various industry reports. As a result, advisers and planners have their work cut out for them as they look to win over members of this demographic.

For example, one in eight Gen Yers would rather have a colonoscopy than discuss money matters, and one in five Gen Yers would rather visit the dentist than discuss long-term financial planning. These findings come from Columbus, Ohio-based Nationwide Mutual Insurance Co.’s Tough Talk survey.

Nevertheless, the financial services industry must focus on Gen Yers, according to Bernard Salt, a partner in New York-based KPMG LLP’s Melbourne, Australia, office and author of a recent report, “Beyond the Baby Boomers: The Rise of Generation Y.”

While a majority of investment products and sales pitches have been finely tuned to catch the attention of the 78 million baby boomers as they approach retirement, he contends, the pool of boomer investors will soon begin to contract, leaving many advisers and planners without a new client base.

Coming from a generation of parents who doted on them, many Gen Yers rely on their parents through their 20s and tend to avoid making long-term commitments.

Gen Yers are also relatively new to the work force and, as a result, have less in savings, according to the report. That may falsely make them less attractive as clients, according to the study.

Rather than wait for twenty- and thirtysomethings to come to them, financial professionals need to plan ways to catch Gen Yers’ attention. And the best route is marketing through their baby boomer parents, Mr. Salt said.

The industry needs to find ways to market through the parents, giving them incentives to set up investment plans for their children and begin to build relationships, he said.

With increasingly heavy competition in the marketplace, finding untapped pools of potential customers is more important than ever.

Generation Y is projected to make up about 33% of the U.S. population by 2020.

That alone is a solid enough reason for planners and advisers to bond with Gen Yers.