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Scott Gallacher: Targeting millennials is a wasted effort

My fellow advisers and other industry experts often speak about a pressing need for us to engage with “millennials” (roughly speaking, the generation of 18- to 35-year-olds). However, I take a completely opposite view.

I am not saying some millennials would not benefit from our advice, but in terms of our own businesses, actively targeting them may simply be an unnecessary distraction.

For success, both client and adviser must get value from the relationship – and that is much more difficult with younger people, who normally have much less money.

Various regulations over the years have exacerbated the profitability problem. For example, the RDR, while welcome, saw the improvements in qualifications and servicing requirements again make it a little more expensive to deliver advice.

Of course, I am assuming a more-or-less traditional model. I acknowledge that, for any adviser managing to crack the “mass market conundrum”, untold riches may await.

However, better-resourced foes (banks and product providers) have been trying and failing for years: witness the various robo-advisers simply burning money at an alarming rate. I respect those who make the effort, but if the big boys cannot make it work, I doubt it is a realistic business for my typical peers.

This month, I came across two statistics that I would argue support my view that there is no need to target millennials.

The first was that there are 3.6 million British households with wealth of more than £1m, according to the Office for National Statistics.

The second was from BBC Radio 4 Moneybox presenter and Money Marketing columnist Paul Lewis, who has managed to get some definitive adviser numbers from the FCA. Apparently, there are 34,724 people advising on retail investments, of whom 25,951 are financial advisers.

These two statistics have an almost beautiful symmetry: for each person advising on retail investments, there are just over 100 households with more than £1m in wealth.

This fits perfectly with the oft-quoted view that 100 to 150 clients per adviser is the optimal number (an idea for which there is some anthropological support, tying in with the Dunbar number, which suggests 150 is the number of individuals any one person can maintain a social relationship with).

It also shows something that most advisers already know: we are not really in competition with each other, as there are more than enough high-quality clients to go around.

Now, I acknowledge my argument is somewhat self-centred and I agree that in a modern, developed country there probably should be a way for the young and the mass market to access good financial advice.

But, to be honest, I think the advice gap is a task for the Government and for the FCA. I will certainly lend my voice in support, but I am also busy running a business, supporting my own mortgage and also those of our staff and their families.

Of course, we do engage with millennials to some extent – mostly the children of established clients – and we are also alive to the need to gradually replace what would otherwise be an ageing client bank.

But as there is a shortage of advisers, it seems likely that as the years roll on and wealth builds that there will be no shortage of millennials actively seeking us out — even more than their parents’ generation did.

Scott Gallacher is director of Rowley Turton

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Pretty much agree BUT as a firm which wants to grow it’s staff organically and internally taking on millennial, training them to understand mortgages and protection as a level 3 qualified staff member and then having them cut their teeth on the latter (if one doesn’t like doing the former as in our case)is a good way for them to develop their skills AND earmark the investment clients of the future to replace those who retire and then die with us older advisers.

  2. Agree. Not our job to fix the advice gap. Sure way of failing is to try and please everyone. Mind you, if parents/granparents wealthy and Millenials going to get that money offer them a free Plan and education otherwise they will p*** it up against the wall. If they reluctant to learn and demonstrate wastrel tendencies then advise parents/granparents of your concern and tie all the capital up it in trust! Gone are the days of gone in 3 generations – gonen 1 more like! They don’t know the difference between a share and a bond or why that might matter.

  3. Sanity at last. As Iain has said it isn’t our job to fix the advice gap. It may come as a surprise to many, but we are not social workers.

    Millennials have more pressing concerns:
    1. Repaying student debt
    2. Saving for somewhere to live.
    3. saving to get married (shacked up)
    4. If 3 then perhaps some life cover (if there are any life companies left)
    5. If at all possible ensuring that they have some cash savings.
    6. All very difficult if they are going to lose 5% of their income to AE.

  4. Agree, but think that developing relationships with the next generation(s) of clients to whom the wealth will flow to, is very important. Research shows that 70% of wealth is lost by the original adviser by the end of 2nd generation and 90% by end of 3rd! Worse still 2/3rds of advisers are sacked by their (deceased) clients kids because they have no relationship with the next generations! This is where inter-generational planning comes in, for example, older generations putting or gifting money for millennials to put into pensions or lifetime ISAs and not only get the benefit of tax relief/bonus, but also saving IHT in a controlled way (where it can’t be p’eed up the wall!) and helps develop relationships with those next generations.

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