Lisa A.K. Kirchenbauer, CFP®, RLP®, CeFT®, has been president of Omega Wealth Management LLC in Arlington, Va., for 18 years. She is also a certified Kolbe® consultant and author of “The 5 Essential Skills™ of an Exceptional Planner.” She is a member of the Strategic Coach community.
Jared Jones, CFP®, is an associate financial adviser at Omega Wealth Management LLC, where he serves as the initial point of contact for millennial clients and works as part of a team approach to serve Omega’s other clients. He is an active member of the FPA NexGen community.
Many financial planning firms today are trying to determine how to develop relationships with their clients’ adult children. The challenge is often found when a planning firm tries to deliver the same experience to these young clients as they deliver to the parents. We believe the key to being successful with this demographic group is to deliver a simplified, technology-enabled, education-focused, valuable offering that fits the needs of the client, rather than just trying to replicate the same time-intensive financial life planning experience our older clients receive.
Why is it important to figure out this demographic? As other Journal contributors have shared, there are multiple reasons to find a way to connect with younger clients, including:
To have a process in place to start building relationships with future generations now. The great wealth transfer promises trillions of dollars will flow to younger generations; the key will be to retain the inherited assets.
To help grow the assets and possibilities of the planning firm, as older clients begin to draw down their assets in retirement.
To help provide opportunities to younger planners to develop their own relationships with clients closer to their own age.
To help ease some of the financial education and advice concerns our clients have about their adult children, giving the children someone (other than their parents) who they can come to for financial and career advice.
To help young people move into their ideal career and ideal life as early as possible, thus creating the possibility for greater life happiness and potentially better financial habits as a result.
The key elements of a successful millennial “offering” include the process, the pricing, and the ongoing offering. Here is an overview of what we have developed at our firm and how we see it playing out within our overall financial life planning business. Use this as a blueprint to best serve your millennial clients.
Our “SmartStart” program was developed, and is now led by, our millennial associate financial adviser, Jared Jones, CFP®. At this point, we are only offering this service to existing clients’ families, and we’re sharing the option as we meet with our existing clients. A couple of points in our process are unique, reflecting how we work with our existing financial life planning clients.
Determine strengths and communication preferences. First, we include running a Kolbe ATM Index for each new young client. Being able to share what someone’s unique strengths are, early on in their professional career, is a true gift and could save the client many years of unhappiness in the wrong career. We also use the Kolbe assessment with all new, traditional, financial life planning clients.
Additionally, we take the client through a communication preference assessment. This helps us understand exactly how the client likes to be communicated with when it comes to talking about money.
Introduce life planning. The next unique element in our millennial program is incorporating the basic financial life planning process of the Kinder Institute’s EVOKE® model into the onboarding process. Over the years, we have heard that perhaps young people aren’t ready to answer the Kinder three questions, but we disagree. As a reminder, the three questions are:
- I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is complete; that is richly yours.
- This time you visit your doctor who tells you that you have only five to 10 years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life and how will you do it?
- This time your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did I miss? Who did I not get to be? What did I not get to do?
We include both the Kinder questions as well as one other Kinder EVOKE exercise, Heart’s Core Grid, to help the client understand what is most important to them. By going through this brief life planning process, we are helping our young clients get clarity and work toward a more intentional life.
As some NexGen planners have expressed, saving for your 70-year-old self when you’re 25 years old seems a bit hard to imagine. Life planning allows a young client to have a more intentional value system and a focused life from the beginning. By getting to the essence of what the client wants to achieve in life, we feel the idea of delayed gratification at a young age becomes more palatable.
Onboarding. Overall, the onboarding process consists of two meetings for single clients and a third meeting for couples. At the second meeting, our goal is to “light the client’s torch,” (another life planning reference, based on George Kinder’s book, Lighting the Torch). This is basically delivering a vision statement created from the life planning answers and discussion. We feel it doesn’t make sense to run financial planning scenarios for young clients while there are so many variables in their lives that cannot yet be answered and will remain that way for the foreseeable future. It would be like trying to predict the weather 40 years from today.
The end of the onboarding process features a one-page (two-sided) deliverable that simply lays out the critical areas of the young client’s financial life situation, where they stand, and a timeline for when they should tackle each recommendation, color-coded for priority now (red), soon (yellow), and later (green).
The challenge for most firms will be finding a way to effectively charge for this service. As it’s been said many times, the traditional 1 percent assets under management fee doesn’t work when there are no assets on which to charge a fee. Therefore, an alternative compensation model is necessary.
At Omega, we decided to make it simple; we set a goal for the millennial offering to break even. We feel that the true value is in establishing and maintaining the relationships with the future generations of our existing client base. This challenges us to be efficient with our time and the amount of service we promise to provide.
For the initial meetings, we charge a flat fee of $750 and then transition to a monthly fee based on the client’s gross income. We also offer the option for these young clients’ parents to pay some or all of the fees.
To help with our young clients’ investments, we have decided to work with Betterment for Advisors, and we do so at no additional fee to our clients. We feel robo-advisers have done a fantastic job at providing affordable investment solutions and automated easy-to-open accounts that are well suited for younger clients.
The Ongoing Offering
The other significant challenge is finding a way to keep millennial clients engaged and paying fees.
To keep demonstrating value to our young clients, we have developed an annual content calendar that combines blogs/vlogs with “homework” assignments. We pair this with two yearly video conference meetings and on-call access to a CFP® professional for any questions or concerns that might pop up along the way.
Opportunity for Young Planners
It’s likely that an established firm’s existing client base has children that fall into the statistics listed in the sidebar, and those children need help. Many clients know their children need financial advice, and they aren’t necessarily up for giving the advice themselves.
We also know it’s not financially viable for an owner of an established planning firm to start ongoing relationships with adult children who can’t meet the firm’s minimums. This leaves a void. It also creates an opportunity for the young planners at the firm to forge ahead and begin building relationships with a natural market for the firm of the future.
Young planners often want to work with people in their age group, and in some cases, leave firms to do so. So, it’s in a financial planning firm’s interest to provide professional development opportunities with a millennial offering such as the one we have created at Omega. Each firm will need to create a program that aligns with its values, goals, and capabilities.
By designing and running an offering explicitly geared for a young planner’s age group, those planners can learn some of the following skills at low risk:
- Business management
- Marketing/business development
- Giving financial advice directly to clients
- Managing client relationships
In closing, not only is developing a unique offering for the children of existing clients an excellent opportunity for established firms, but it is a great opportunity for developing and retaining young talent.
It is an important time for the planning profession and for established firms to begin considering how they will work with the next generation of clients and planners.