The advice profession is racing to meet the challenge of bringing younger clients onto its books.
The average age of IFAs may not be falling, but with the rise of the digital age they are employing newer and more innovative tools and techniques for their delivery.
But how do clients who may be many years away from retirement want to engage with financial advice?
Research out this month from Aegon revealed that despite concerns over the lack of early financial planning in the UK, with three-quarters of advisers raising a red flag on the issue, they are struggling to attract a younger client base.
One in three advisers said they found it a “real challenge” to reach the younger demographic.
While intergenerational planning is the obvious route, with professional and corporate connections likely not very far behind, there are other factors at play.
The value of young savers as clients has, historically, been a subject of fierce debate. In the days of commissions based on assets under management, a twenty-something with a high salary but no savings might not have been particularly attractive as a client.
Engage FS managing director Sam Sloma believes operating a fixed-fee model has helped address this issue.
He says: “It was frustrating because I used to find I was going out and meeting really great people who were on decent incomes but they didn’t have any assets to invest. So I had to turn them away.”
He explains that the ‘old model’ that was common across advice did not provide advisers will sufficient remuneration to warrant the time spent.
“Whereas if they are paying a fee for a service, that is something they are used to doing. As it is likely their first relationship where someone else is taking an interest in their money – buying their first home, starting a family and so on – establishing that trust is a hurdle that takes time to overcome, but having a fee structure helps with that.”
Sloma says the use of technology and integrated apps are not as common as one might think among young savers.
“Those we work with are busy people – lawyers, accountants and young professionals. They are paying someone to take the hassle away from them and appreciate the value in that. Their human capital is far more valuable than their investment capital.”
It is not just the business model that has moved on, but society and employment models more broadly.
DFP Wealth Management IFA Sean Irwin says: “Most IFAs probably see their wealth management ‘perfect pig’ as a baby boomer in their 50s or nearing retirement. But millennials are totally different. There is a spectrum of millennials within that category.
“They have had to be more entrepreneurial and don’t have the same expectations as the previous generations of having a job for life. If their parents or grandparents were a plumber, they were a plumber for life. Now we live in the digital age with far fewer people going to do apprenticeships, for instance.
“When we go to networking events it seems so many are going into areas like graphic design – they have very different needs. But because they are more entrepreneurial, some of them will go on to be more successful at a fairly young age – they could be employing 20 people by the age of 30, for example.”