The high-net-worth epic fail: Gen Y’s pink slip

Only you know how hard you have worked to earn the business of your high-net-worth clients. You made sure to involve their spouse at the right time. You got the business partners to buy in. You even brought along their CPA, so he/she wouldn't kill your planning ideas. Congratulations.

But what about those clients' kids? You've probably seen this scenario play out many times: the client dies and the kids take the money and run — away from the advisor, that is.

While the kids are not the decision makers, they have a lot of power in the relationship between you and your client's assets. In particular, we are talking about the children of baby boomers — Millennials, or Generation Y. This generation, born after 1980, is the most powerful to walk the planet.

I've heard many advisors and insurance company executives say in a variety of different contexts that Gen Y is just not worth their time and effort. They can't make enough money in "that" market.

Usually, it will sound something like this:

"They don't have the money to invest or buy life insurance."

"They would only want to buy term insurance, and at their age, it would be so cheap, it wouldn't pay enough to fill my gas tank to go on the appointment."

"Death and estate planning are the last things on their minds."

Even if the above is true, it is not the point. It's not about selling to Gen Yers; it is about keeping them as clients after they inherit the money — and gaining them as clients once they begin earning more money and making big boy and big girl decisions. The oldest members of Gen Y are in their 30s, so this has already begun.

Why do the kids take the money and run?

It is probably more than one reason, not the least of which is that they have already formed an opinion about what they should (or should not) do when they inherit the money. If they have an opinion already, where did it come from, if not from you?

Gen Yers are very good at selling things to themselves. Yes, you read that right. This is called prosumerism (Wikinomics). They research online and ask people whom they trust — like friends, co-workers, and possibly parents, if money conversations are comfortable for them — and then make the decision about what they should do. Then they do it.

If their parents talk about money with them, the advisor may have a place in the Gen Yers discussion. If not, then the Millennial will act in a vacuum, possibly adopting some of these Gen Y attitudes found in a recent study by Maddock Douglas:

75 percent say insurance agents try to sell them stuff they don't need.
53 percent say insurance companies cannot be trusted.
48 percent say they don't know where to turn for trustworthy advice.

The combination of these attitudes and the lack of money conversations can lead to the Gen Y pink slip.

What can you do about it?

Get some Gen Y practice, or better yet, get some Gen Y into your practice.

See also: When and how to hire staff

Michael Babikian, thought leader on intergenerational wealth and president and CEO for Transamerica Brokerage (www.michaelbabikian.com), offers this from his own experience working as an attorney in a family office:

"It's only natural that clients tend to bond with an advisor of their own generation, so having a team that appeals to a range of ages is crucial. A practice should include people that each generation considers a peer. Younger advisors will bond more with the future generations and vice versa. Without someone who feels like an advocate for the heirs, they will switch advisors instantly once control is transferred."

What else might you consider to get better at serving this generation of future consumers? Consider various ways to develop relationships with the heirs of your clients before they inherit anything. As Wayne Gretzky would say, "I skate to where the puck is going to be, not where it has been."

For more from Maria Ferrante-Schepis, see:

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