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Serving the younger generation in wealth management


Many bank wealth management groups serve young people as “accommodation clients” – because they are family members of existing clients. But as Gen X and Millennials accumulate more assets, banks will have to sharpen their focus on courting them if they want to thrive in the future.

“The banks that are successful in attracting younger clients know they can’t have a one-size-fits-all approach – they need to get the message right and recognize their goals, whether it’s buying a house, paying off their student loans or saving enough for retirement,” says William Trout, a senior analyst with Celent’s wealth management practice in Houston.

Trout adds young individuals, although typically not profitable to serve initially, are often brought in by banks as part of the broader relationship. In general, however, banks tend to make differentiated offers to younger clients via their mass affluent units, which also serve a large segment of Baby Boomers.

Drilling down further, BAI research has found that the ability to sell investment products to the millennial segment varies widely among banks. Some are able to achieve nearly double the average household penetration while others struggle to reach even half the average. Most of the top performing banks in the millennial segment are also top investment performers in general, so the millennial segmentation performance may be a byproduct of a strong investment program rather than specific efforts directed at millennials. However, a few banks exceed the average on investment sales to Millennials leading to the conclusion that targeted efforts may be underway and successful.

BAI research also breaks Millennials into six segments based on their age and income. As might be expected, older, higher income Millennials are the most likely to have investments with their bank at nearly double the rate of the average Millennial, while younger, high-income Millennials have nearly average household use of investments and the highest average balances of all Millennial sub-segments.

Financial Literacy Issue

Gerald Laurain, Chief Investment Officer of FTB Advisors, a unit of First Tennessee Bank in Memphis, says his team tries to address specific needs of each client, young or old, and whether they fit within the mass affluent or the high-net-worth segments. “I don’t think about it as much as what year they were born, but just where they are in their economic life cycle,” Laurain says. “If they’re young, that could mean being in the early stages of their career trying to pay off student loans, or saving money for a down payment on a mortgage.”

FTB Advisors has broadened its marketing efforts from just discussing trust advisory services on National Public Radio or sponsoring golf tournaments to finding additional ways to attract younger people, such as sponsoring the Memphis Grizzlies basketball team. Younger individuals typically want a lot of information for free and the kinds of information they are looking for are things they didn’t learn in college, such as how to save money, Laurain says.

“Say they are 29 and trying to decide whether to get a roommate; they might not be really focused on whether they should open an IRA or start funding a 401(k) or how much to invest each month. It’s really about going back to the basics with them, in a very respectful manner. We need to be educational, almost like a symposium with a syllabus, but in small enough bites that they can consume quickly but also be able to refer back to.”

Many younger individuals who saw what happened to the markets after the financial crisis are now sitting on the sidelines, Laurain adds. However, his team lets them know “that’s not going to help them a whole lot” and they should get out of cash for long-term growth. “But even before that, we first have to help them figure out how to save – the issue is basic financial literacy.”

Jeffrey Seavey, a wealth advisor at Atlanta-based SunTrust Private Wealth Management, which serves high-net-worth families, says that about a decade ago his team realized there was a big gap in the advice and education they were providing to both older and younger generations. “No matter whether their kids inherited or created wealth themselves, the parents didn’t feel confident that their children were prepared to manage a significant level of wealth,” Seavey says.

The unit then brought on a younger advisor, Mary Lowell Downing, to interact directly and exclusively with the younger family members. Downing says that interactions with younger clients are typically less formal than with their older family members, with more frequent lunches or talking over coffee. These customers also prefer that lines of communication remain open, for example, for trading emails on weekends or odd hours at night. “When Millennials have a thought or concern, they want to share it right then and there,” Downing says.

“A big piece of my work with them is education – making sure they understand how to make their money work for them,” she adds. “Millennials tend to have very targeted questions, and they really look to us as subject matter experts.”

Seavey notes that younger clients also ask for more information about advisory fees and more background information on the institution to ensure there are no conflicts of interest. “Older generations take comfort in the fact that we’re a larger bank, whereas younger people need to just spend more time getting to know how our team works,” he says.

Social Marketing

SunTrust’s marketing events for younger clients are much more social, such as enjoying a recent Beyonce concert with them, or holding a happy hour, or bringing in Apple executives to demonstrate how clients can use the latest features on their Apple devices, Downing says. “They are more laid-back settings that enable us to sit and talk to clients about topics other than just investing,” she says. 

The bank also has a group dedicated to serving the mass affluent through its SunTrust Investment Services Inc., says Jeff Walters, a vice president and financial advisor for the group in Charlotte, N.C. Walters and a colleague, Nic Nielsen, another vice president and financial advisor for the group, are both Gen Xers and typically market more to their generational peers and Millennials.

The group is aided by SunTrust’s physician loan program, which attracts young doctors to the bank who then are referred to the premier banking group to work with a financial team like Walters and Nielsen. The teams also find younger prospects by meeting them “in our natural market,” Walters says. “For example, I’m a member of an ice hockey team in which all of us are in the same age bracket, between 30 and 55,” he says. “What we do for a living comes out in casual conversation and many are looking for advice and guidance and don’t know where to look for it.”

Something counterintuitive that the two have found: because younger people are very connected on social media via their mobile devices or laptops, “sometimes they just really crave personal interaction with us, perhaps much more so than Baby Boomers,” Nielsen says.

Younger individuals also seek more guidance, particularly about cash flow management, he says. They might have, say, $15,000 of monthly income and $5,000 in fixed expenses, and may want to figure out the best use of the remaining $10,000. Should they use that to pay down their student loan debt or begin to invest in their future, or buy life insurance or disability insurance? “They can find information on the Internet, but they crave the face-to-face interaction and guidance we can provide,” Nielsen says.

Mr. Hoscheidt is managing director, Research, with BAI and can be reached at [email protected].