FAs Must Offer Tiered Service to Lure Millennials
Traditional financial advisors face tough competition from low-cost digital platforms when it comes to recruiting Millennial clients, Steven Ridder writes in Financial Advisor magazine. To ensure survival, advisors should offer several levels of service and devise ways to combine advice from human advisors and robos, he writes.
Millennials are particularly cost-conscious thanks to skyrocketing amounts of student debt unmet by sufficient income, with average salaries falling from 2009 to 2012, according to Ridder, a practice advisor for the business transformation group of Cisco Systems.
Robo-advice platforms targeting Millennials, meanwhile, are offering financial advice at almost no cost and with no human interaction involved, he writes. And this generation is far more comfortable with an app than with an actual human in an expensive office, Ridder writes.
To remain competitive and grab a chunk of the projected $30 trillion wealth transfer in the coming years, traditional wealth practices will need to evolve, according to Ridder. They can start by offering tiered services that include low-cost self-service models of advice, similar to the “freemium model” developed by the software industry, he writes. Once their Millennial clients build wealth and require more customized advice, wealth managers can then step them up to higher-fee services, according to Ridder. Some version of hybrid advice can bridge the gap between robo-only and human advice, he writes.
But advisors also need to be able to demonstrate the added value they bring above and beyond any software, according to Ridder. In addition, they’ll need to learn how to market that differentiation to Millennials, he writes. And to do so, companies will need to learn to speak Millennials’ language. That means dedicating the time and resources to understand them and adapting to their needs, according to Ridder.