Wealth managers face a challenge of attracting NextGen clients - or indeed retaining their clients' adult children as clients as assets move across generations. To make the changes required advisors must understand what the next cohort of asset owners want - and that's far from straightforward.

When it comes to younger clients, wealth managers can identify with Winston Churchill’s description of Russia: "A riddle, wrapped in a mystery, inside an enigma." 

The challenge of finding the best way of attracting and retaining those elusive clients under 40 years old was front and center at the Philadelphia CFA Society’s recent Private Wealth Management Conference.

Staying hyper-focused on a younger demographic has proven to be a successful strategy for Activate Wealth, said Taylor Venanzi, founder and CEO of the Philadelphia-based RIA, a panelist on the conference’s session on Next Gen clients: “What They Want from their Advisors and How to Work With Them.”

“I want clients to look as similar as possible,” Venanzi said. “It helps marketing and scalability.”

Desire to learn
The key to engaging with younger clients is recognizing their innate curiosity and desire to learn, said Stan Treger, a behavioral scientist who works for Northern Trust. “Younger people are eager to learn as much as they can,” Treger said. “They have a lot of motivation to find out what’s going on what’s under the hood.”

Jason Ray, CEO of Zenith Wealth Partners, a Philadelphia-based RIA specializing in working with young people, women and people of color, agreed. 

“We’ve seen how important it is to be transparent with this demographic,” Ray noted. “They want to know why we make the decisions that we do and the details around them. A Baby Boomer probably wouldn’t care why you chose to use Google instead of Microsoft, but younger clients do. We’ve found it’s important to put everything on the table at the beginning of the relationship.”

Tech track
Tech fluency is also critical for younger clients, according to the panelists.

To be sure, younger clients value personal relationships with their advisors, Venanzi said. “They want a partner they can trust, but one that uses tech to make the relationship more efficient. For example, they may not have time to meet with you in person, but they want to stay on track, so all our meetings are now 100 per cent virtual.”

Ray has found that younger clients become impatient if advisors aren’t keeping up with tech trends. “There’s a constant need to innovate as technology changes,” he explained. “As software is updated and apps get better, your offering can’t be stale if you want to engage efficiently. Using the same thing quarter after quarter won’t work.”

Both Ray and Venanzi have found that younger clients have responded well to interactive tools that allow client and advisor to work together online.

Venanzi uses task-managed software to input “to do” items for clients that keeps them engaged. Ray also uses software to assign clients tasks and had high praise for Google Drive allowing advisor and clients to work together virtually and go back and forth to update documents.

Impact and inexperience
Older wealth managers also need to recognize the importance of impact investing for younger clients, the panelists said. 

“These clients are investing for their values and the more we can help them source the right companies the better it is for the relationship,” Ray said. Younger clients are extremely concerned with the purpose behind their actions, according to Venanzi. “The question we constantly hear is ‘Why are we doing this with our money?’”

And when it comes to investing and financial planning, advisors need to recognize that younger clients are often uncertain about what they’re doing, the panelists cautioned. “These are clients who are early in their careers,” Venanzi noted. “There’s a prevailing anxiety and questioning whether they are on the right path.”

In fact, Ray believes that advisors should sometimes allow younger clients to make investing mistakes if they’re not too consequential. “You explain the risks, but sometimes the best way to learn is by making a mistake,” he explains. “It’s a little like teaching your children to ride a bike. Sometimes they have to fall off.”