To accompany the launch of our new series on intergenerational planning, we spoke to five advisers about what they are doing to attract the next generation of clients.
For Eleanor Clark, a financial planner at Essex-based Perceptive Planning, numbers tell the story. In a survey of 1,000 investors conducted by MFS Investment Management, three-quarters of clients said their children had never met their financial adviser. Little wonder then that only 2% of children stay with their parents’ adviser, according to a PricewaterhouseCoopers global wealth management survey. Likewise, Fidelity as well as the Institute for Preparing Heirs found that 5-10% of offspring retain their parents’ advisers upon receiving their inheritance.
‘The US is on the cusp of the largest wealth transfer in the country’s history: about trillion will be handed down to the next generation by 2050 and we can see the same trends in the UK,’ says Eleanor.
‘Clearly, financial advisers who don’t form bonds now with these beneficiaries-to-be are ignoring a tremendous opportunity. Like most financial planners, our core client base was those in retirement, and so in 2014 we decided to address this.’
The company started offering free financial planning to children of clients and created a protocol that ‘gifts come with a planner attached’. As a result, more than 80% of children of clients became clients in their own right.
‘Whilst that number has dropped a bit as we have grown, we’ve seen substantial benefits already – inheritances have stayed with the firm and as children become wealthier, their needs as clients grow. Indeed, some children are already wealthier than their parents!’
As a company committed to responsible investing, Castlefield is tapping into a fresh generation of investors that is more inclined towards this as an investment style.
‘There’s evidence that younger investors, who’ve grown up with the discussion around climate change and environmental degradation, are taking these areas much more seriously and we’ve developed a fund proposition tailored to meet this demand from the market,’ says partner John Ditchfield, who is based in London.
The company has also adapted its advice proposition to include a simple ‘overview’ service that has a lower ongoing fee (0.6% versus 0.8% for its ongoing advice service) and is designed to be more focused on a specific requirement.
‘Any business looking to secure its long-term future needs to be able to secure a mix of customers so not just older, wealthier individuals who have accumulated their wealth,’ says John.
‘We found a lot of people coming to the firm with smaller amounts to invest and therefore in need of a slimmed down service offering. So this might work well for someone looking to establish a pension or savings plan for the first time and make regular payments.’
As an employee-owned company John believes the business structure also holds appeal to younger generations, who may be more inclined to be critical of some of the financial service sector’s historic practices.
‘We also think our brand has a more youthful feel. We use social media communications and update our site regularly with articles and insight pieces,’ adds John.
GS Group adviser Mike Baxter deems it ‘extremely important’ to understand the needs of millennials – ‘the future of our business’.
A millennial himself (just), he says: ‘We are a generation of time savers who want everything at our fingertips and want it yesterday. We’ve grown up in a period where technology has moved faster than at any point in history. We’ve become used to it and in many ways depend on it.’
Perth-based GS Group is developing ways to better cater for the needs of younger generations. It is developing an online investment proposition that will enable it to better serve this market.
‘Our research suggests that millennials are accumulating wealth and looking for a low cost, easy access online or an app-type proposition that they can control with our help. We hope to have a cost effective solution for both the client and business within the coming months.’
The firm is also moving to a low paper environment and uses Mail Chimp to communicate with clients.
‘Millennials want bite-sized information that they can digest easily through videos or text. They also want the information when it is topical or needed,’ says Mike.
‘Mail Chimp helps us manage a subscriber list and enables sharing on Facebook, Twitter and LinkedIn. We find that clients are willing to share our posts if they think they will help their connections. Mail Chimp also provides us with analytics to see who opens emails, who shares. It really is a great piece of kit!’
WESTBURY ASSET MANAGEMENT
For Nigel Notley, managing partner of Hertfordshire’s Westbury Asset Management, attending client funerals allows him to pay his respects as well as connect with those who are inheriting his clients’ money.
‘I see attending funerals as very much a part of the job,’ he says. ‘The client’s family expect me to be there and I do nothing other than introduce myself.
‘Often, I have been looking after the client for a long time. The client will have viewed me as indispensable. It frequently transpires that I’m mentioned in the will as the person to contact or even an executor.
‘Normally, the spouse contacts me and I do my best to re-assure her or him and set out immediately with a resume of what the client has and how it is affected in terms of tax, specifically inheritance tax.’
If the spouse does not need the death benefits from residual pension funds, these pass to the children. ‘We set up the wrap accounts to take the money,’ says Nigel. ‘The person who has inherited obviously needs time to dwell on what to do with the funds, but it is better under our control than in their bank account.’
Although it is time consuming, he also sets up trusts for the children and grandchildren of important clients. ‘I suppose this is a form of trickle down wealth management,’ he says. ‘Finally, we have younger colleagues in the firm so that our clients can see there is a long-term succession plan in place.’
FINANCIAL MANAGEMENT BUREAU
When Cumbria’s Financial Management Bureau (FMB) attracts a client, the hope is that they will stay with the company for a lifetime.
‘That is a long time, but we have to keep an eye on future income streams,’ says director of business development Rush Power. ‘We focus on family relationships with children and attorneys and beneficiaries, getting them involved in the process and extending invitations to events.’
A recent event called Ducks in a Row aimed at helping those aged 35-50 get their legal and financial affairs in order. It was promoted via FMB’s social media channels, including Facebook Live.
‘We’re as active as we can be, using paid ads to boost posts and linking to website blogs. We have invested heavily in our website to make sure it meets the demands of the latest tech. We use Klout and Google Analytics to monitor success,’ says Ruth.
FMB has also begun converting clients to its personal finance portal whereby they can see all their assets online and the adviser can message them securely. This has helped it deliver a lower-cost service for those with less than £100,000 to invest, called Simply FMB, using a selected fund panel and telephone support.
“We have to be careful of targeting markets if we cannot deliver a profitable service to them, but on the other hand we are nurturing future clients who have the potential to become profitable. We just have to be wary of being all things to all people,” adds Ruth.