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What Advisors Can Do to Connect With Clients of Different Generations

By Crucial Clips     January 2, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ @ Schwab Impact, Oct. 30, 2018 

GARRETT KEYES, REPORTER, FINANCIAL ADVISOR IQ: My name is Garrett Keyes. I'm a reporter for Financial Advisor IQ. And I'm here today at the Schwab Impact Conference with Mike Van Wyk, vice president of customer research for Capital Group.

Mike, is there something advisors can do to better advise each individual generation?

MIKE VAN WYK, VICE PRESIDENT, CUSTOMER RESEARCH & INSIGHTS, CAPITAL GROUP: Absolutely. So there's a lot of things advisors can do to use knowledge about the different generations to connect with them more effectively.

So just walking through that briefly, with millennials what we know is for millennials advisors need to establish relevance for millennials, because it's one of the things that millennials will have questions about for their advisors.

For Gen X they need to establish trust, because there is a trust gap that seems to be built into the Gen X generation. And with boomers, actually boomers are relatively content. But what advisors need to do is understand what stressors boomers are facing as they head into retirement, and help them solve those problems.

GARRETT KEYES: So right now when advisors are working with millennials, boomers, and Gen X clients, what are they doing incorrectly to individualize each generation's advice?

MIKE VAN WYK: One thing that advisors always do right is they work to be personalized. Regardless of generation, they work to be personalized and to connect to the investors that they serve.

What they can do better is understanding how the context for that generation, the life experiences that that generation went through, how it's impacting the way they're navigating each of the challenges at their life stage.

So for millennials, because they came out of the recession, they are going to be very conservative about their investments. But because they've seen the market perform so strongly, they tend to have very, very high expectations. So understanding those, what we would call imprints, for each generation, and how it impacts the way that they will engage with their advisor and the type of advice they need, that's one thing advisors should be particularly aware of.

GARRETT KEYES: For a Gen X generation, what can advisors do to individualize the advice they give to that generation? What distinguishes them from millennials and from boomers?

MIKE VAN WYK: Gen X generation is very interesting. I am a Gen Xer. And so I can relate to a lot of what I saw within the research.

A Gen X client is going to tend to be, and frankly, somewhat mistrusting. And that comes from the fact that they had a lot of independence during their formative years. They were often called the latchkey generation.

And they also, as they became adults, they saw that the market wasn't delivering consistently the returns that they would need to reach their retirement goals. They saw a lot of volatility over periods of time within the market. And so you have a very skeptical generation that doesn't feel that the markets necessarily have worked to their advantage. And they're looking to hit their retirement goals by getting aggressive at this particular stage in life.

So knowing that you have that dynamic from most Gen X clients, it should sensitize advisors to the fact that they need to establish trust. And also, they're most likely working with a generation that feels that there is a gap relative to where they wish to be financially in order to hit retirement in comfort.

GARRETT KEYES: For the boomer generation what do advisors need to specifically do to, broadly speaking, work better with boomer clients?

MIKE VAN WYK: Yeah. Boomers are at an interesting stage, because they're moving into retirement. And one of the things that I really liked when I looked at our research is to see the level of contentment that boomers have as they move into retirement. Three out of four say that they're settling into retirement with sufficient financial security to be able to live the lifestyle that they wish.

So there's generally a pretty good contentment on the part of boomer clients. But that doesn't mean that there isn't stress. And a couple examples of where we see boomers expressing concerns or stresses during the retirement stage are a worry about health care. And, first of all, just the absolute cost of health care. But then their own individual health, and how that will impact the retirement that they're looking forward to.

And then, of course, taxes. It comes up consistently that there's a concern about the tax implications for their financial well-being as they move into this retirement stage.

GARRETT KEYES: So how do advisors go about implementing these changes in how they advise generational clients? I guess, what specifically do they need to do first?

MIKE VAN WYK: It's habits that should feel familiar to advisors. The first thing is, really understanding for each client where they are in terms of their own objectives, their own goals, and their own readiness for retirement.

It's then understanding that there are avenues that they should be exploring, in particular for a millennial client, relative to a Gen X client, relative to a boomer.

And then it's not assuming that once you have established an understanding of where that individual client is in terms of their attitudes and their needs, not assuming that those stay stable. That's where we see some disconnects start to emerge between a financial advisor and their clients is there is an assumption on the part of the advisor that things haven't changed, while for the investor, for the client, things have actually moved in terms of some of their motivations and interests. And they're not sharing them necessarily proactively with the advisor if the adviser doesn't ask.

GARRETT KEYES: Does it come down to communication between the adviser and each client of each generation?

MIKE VAN WYK: So much of the success of an advisor does come down to communication. And I believe successful advisors already know how to communicate well. What they need to be doing is just being particularly sensitized to some of the things that they should be exploring a bit more deeply, and I would say the frequency with which they ask the broader questions about the goals that that client holds.

I think there's sometimes a disconnect between what the advisor assumes has stayed stable in terms of goals and what's actually happening for the individual investor.

GARRETT KEYES: Thank you for speaking with me today, Mike. I appreciate it.

MIKE VAN WYK: Thank you for having me.