How Do Wealthy Next-Gen Investors Decide Which Financial Advisor to Work With?

This article originally appeared on Wealth Management on September 14, 2021, and can be found here.

How do high-net-worth clients choose a financial advisor? What is the most important criterion that wealthy investors use when deciding who to work with as their advisor?

If you are reading this thinking “referrals!” you are not alone. Referrals are traditionally the answer most advisors give to this question. After all, referrals are traditionally how advisors have grown and maintained their businesses for years.

Yet a new study from the Spectrem Group describes that not only isn’t this always the case, but that younger generations are increasingly using much different criteria when selecting their advisor.

The study found that just 4% of millennials chose "comes with a strong recommendation from trusted family/friends" as their top criterion. This is a mind-blowing statistic for an industry that has traditionally relied mostly on referrals to attract new business.

I’ve been saying for years (and have written about this very subject before) that as younger generations come into wealth and begin their search for an advisor they will use the same digital means to find those advisors (namely, the internet) that they use to find any other service or product. This new study is just another set of data backing up that shift.

So, how can advisors adjust to attract the next generation of investors?

Let’s look at the top five criteria each of the generations surveyed selected as the No. 1 most important when selecting an advisor, and what you can do from a marketing perspective to demonstrate you meet those criteria.

The Top 5 Criteria Chosen Overall:

1. The firm is genuinely interested in the client’s goals: Of course, it can be easy to show you care in one-on-one interaction. But how do you show this in your marketing? The best way is to be highly specific about who you serve and what exactly you do to help them. What problems do you help solve for the particular audience you serve? A prospect visiting your website should be able to glean this information immediately just by looking at your homepage.
2. The firm provides great service: This one is pretty self-explanatory, but again, how do you show this in your marketing? Well, the new SEC ad rule will make it a bit easier; you can now collect and showcase reviews and testimonials from existing clients. And since we all look at reviews for everything these days—whether we are buying a shirt or booking a hotel—expect prospects to spend time looking at your firm’s Google Reviews.
3. The firm has reasonable fees: What constitutes “reasonable” is up for debate. But what should be emphasized here is transparency. No matter what you charge, your fees should be listed clearly on your website, alongside what clients can expect to receive in return for those fees. Different generations also have different expectations for what’s considered a reasonable fee. Many millennials for instance (whose current wealth might be tied up elsewhere and thus not meet your firm’s AUM minimum) are looking for subscription-based fees. Providing multiple fee types to appeal to different demographics is a great solution.
4. The firm has a strong investment track record: How has your firm historically performed? Every generation naturally cares about performance, so be sure to show an example of your track record.
5. The firm employs competent personnel: Clients want to know the team they are working with is well educated, competent and knowledgeable. Firms can show this in their marketing by providing ongoing education through their email newsletters, social media and other forms of content creation. And you don’t necessarily need to always be authoring your own. Curating relevant and timely information from other well-regarded authors and publications across the web is another way to show clients that your team is active and informed.

These five criteria set a foundation for advisors to attract every generation. But what will truly move the needle is paying attention to the differences within your chosen target audience’s generation.

For example:

• Only 3% of Gen X felt it wasn’t necessary for an advisor to be associated with a well-known brand. Whereas both younger and older generations thought it was.
• Millennials felt investment track records were valuable (15%) but not as much as other generations.
• 15% of millennials chose “Use of social media tools like Facebook and LinkedIn” as their No. 1 criterion! If attracting the next generation of wealthy investors is important to your firm—take note!