A Huge Opportunity for Financial Advisors

Why Millennial millionaires' potential advisor switch is good news for you

Ric Edelman: It's Tuesday, April 23rd. On today's show, are Millennials happy with their financial advisors? A new survey of Millennial millionaires just came out. These people have a million dollars or more in investable assets. And when I say investable assets, I mean money that they can transfer to a financial advisor who will invest the money for them. 

We're not talking about the other assets of Millennials. We ignore their home and all their other real estate. We count their IRAs, but we ignore the money in their retirement plans at work. We ignore their businesses if they own one. We ignore their art and jewelry and cars and all that other stuff. All we're counting is the money they have for investing. 

So when we say that they have a million dollars to invest, we're saying that their actual net worth is a lot higher than that. And here's the shocking thing about this survey. One third of these Millennial millionaires say that they probably or definitely will switch advisors within the next year. 

Already, 70% of them use two advisors. This represents a huge opportunity for financial advisors. Here's what you have to understand. Millennials range in age from 25 to 43. Most of the clients of financial advisors, they're baby boomers, not Millennials. Advisors don't even serve many Gen Xers. Those are the folks in between the Millennials and the Boomers. Gen Xers are people 44 to 59. The Boomers are older than 59.  

There are two main reasons that most advisors are serving mostly Boomers. First, Boomers are the ones with most of the money. Boomers are only 21% of the US population, but they have 51% of all the money. That's nothing new. The older you get, the wealthier you get. And since advisors like to serve people with money, because the more money you have, the more money advisors can earn by serving you, this means that advisors mostly serve boomers. 

And related to this is the fact that people who have money are the people who need advisors the most. If you've got millions of dollars, and you own a couple of companies, and you've got three houses, four kids, and several ex-spouses, you've got a financially complicated life. That means you need an advisor. Compared to, say, someone fresh out of college with no house, no spouse, no money. Yeah, I always argue that the younger and poorer you are, the more important it is that you get the help of an advisor. But that's a different conversation.  

The fact is, people with money are the ones who seek out advisors. And advisors like to serve people with money more than they like to serve people who don't have money. So, that's the first reason that advisors are mostly serving boomers. The boomers have most of the money. 

But the second reason that advisors serve mostly Boomers, this is more interesting. It's because advisors are mostly Boomers themselves. Most advisors have been in this business for 30 or 40 years. The average advisor is now 62. And the clients they're serving are mostly the clients they've always been serving. Clients are very loyal to their advisors, just like they are to their doctors and lawyers and accountants. Most advisors only serve a hundred or two hundred clients. They spend their first five or ten years looking for those clients. Once they get them, they keep them. When I was in my 20s, the clients I mostly brought into the firm were also in their 20s. When I got into my 30s, my new clients were mostly in their 30s. As I aged, so did the age of my new clients. And as we grew up, we all grew up together. Older together. Today, most advisors in their 50s and 60s and 70s aren't taking on any new clients. They're busy serving the ones they've already got.  

So here's the thing. Most firms have advisors who are mostly older, and they're mostly serving clients who are also mostly older. At the same time, a third of Millennial millionaires say that they're going to be looking for a new advisor this year or next year. This is a wonderful opportunity for firms to do two things. First, go hire more advisors. And not just any advisors, but younger advisors. The Millennials are the ages of the kids and grandkids of the Boomers. The Millennials won't relate to Boomer advisors. You want someone your age, someone you can relate to, someone you'd like to hang out with. So the successful established advisors and firms of today need to go out and hire younger advisors. Not just younger ones, but hungrier ones. People who want to build their practice by filling it with new clients, new rich clients, Millennial millionaires. 

This is really worth doing. Millennials are going to be the richest generation in human history. Here in the US, they're going to inherit $90 trillion over the next 20 years as their Boomer elders start to die. And most of that inheritance is just going to go to a small portion of Millennials, the ones who are rich today. Because if you're rich, odds are pretty good it's because your parents and grandparents were rich. People in poverty have elders who were in poverty. Rich people send their kids to college so they can become successful and rich too. Plus, they inherit. I'm not saying this is good, or right, or fair. I'm just saying this is the way it is. And so you advisors and firms that are smart enough to realize all this, if you want to cater to Millennials, you have to be where they are and where they are is digital. 86% of Millennials say they rely on their advisors website for information. 60% of Millennials use their advisor's mobile app. If you think you can serve Millennials by calling them on the phone or dragging them into your office for a meeting. Well, now you know why a third of Millennial millionaires are shopping for new advisors. The future belongs to the young and to those who serve them. 

On tomorrow's show, the true story about the federal budget. 

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