If you're in your 40s or older, you may remember the big flap when TV sitcom journalist Murphy Brown, played by Candice Bergen, decided to have a baby without benefit of marriage. Among those who sounded off was then-Vice President Dan Quayle, who publicly chastised single mothers like the fictional Murphy for "ignoring the importance of fathers."
Without in any way denying the value of dads, we'd point out that since that breakthrough in 1992, there has been a seismic shift in the modern American family's diversity. Today, the traditional model of a married mom and dad and one or more children represents only 20 percent of families, according to "LoveFamilyMoney," a 2014 study funded by Allianz.
"The key thing that came from this study is the identification of seven cohorts within the modern family," explained John Carroll, head of U.S. retail distribution for Allianz Global Investors. Traditional families — opposite-sex married couples with at least one child under 21 living at home — are only one of the seven. The other six:
- Multigenerational families (three or more generations in the same household)
- Single-parent families
- Same-sex couples, married or unmarried, with or without children
- Blended heterosexual families with offspring from previous relationships
- Older parents (over 40), with one or more children under 5
- Boomerang families (adult couples with at least one child aged 21-35 who has returned home)
These six cohorts, which tend to skew older and more female, are more likely than traditional families to experience financial hardship. "Because of the greater complexity of their lives, they have a real need for financial advice," Carroll pointed out. However, fewer than half (43 percent) have ever consulted a financial professional. The Allianz study targets them as "the next frontier" for financial advisors.
Broader, deeper relationships
Taking on new clients among these nontraditional cohorts will mean dealing with expanded relationships. Instead of working with one individual or a single-generation couple, you may be involved with a much greater number of people and multiple generations' concurrent needs.
"This changes what advisors will have to focus on," Carroll observed. "They'll need to get more personal in the topics that they're discussing. They'll have to have a deep, empathetic understanding of their clients' specific needs and characteristics." Deeper understanding will enable advisors to customize solutions that go beyond investment products to cover tax issues, education funding options and so on.
Carroll noted that advisors should be prepared to spend more time on relationships. Traditionally, he said, serving clients was "quick and much more transactional. Now it's morphed into a more planning-based culture, which takes more time. And now you have these more complicated families that require different solutions, which will take even more time."
This may sound daunting, and could lead to reviewing the advisory compensation structure, but in Carroll's view, continuing to focus on a traditional client base of older white males isn't really an option. "Those clients are going to look more 'modern' as they age," he explained. "They're going to have things happen in their lives that will force them into [nontraditional] cohorts. They might have boomerang kids; they might end up in a multigenerational situation; they might have second or even third marriages. So their lives are going to change. Some clients will still be traditional but most won't, and advisors need to get used to this."
More fingers in the pot
If your own family follows the traditional model, it may be difficult to imagine the scope of changes in your practice. "Many advisors don't reflect the changing diversity of our nation, whether it be their family structure or diverse ethnicities," said Cam Marston, president of Generational Insights in Mobile, Alabama, which specializes in the impact of generational change (see page 64). "But the traditional 'Americana' household of husband, wife and a few kids may now include a few ex-husbands and ex-wives and quite a few stepchildren. There will be a lot more fingers in the pot and a lot more people impacted by a breadwinner's decisions."
Although such family structures may seem "alien," Marston added, "advisors can't flinch when they hear these things. These modern families have become the new norm, and they may have long tentacles, which will impact future business."
Advisors will need to learn to map out a family's structure so they can clearly understand the decision-making implications. Good communication skills and an understanding of basic psychology will be more helpful than ever for dealing with the greater complexity of these relationships. You'll need to be prepared for "heirs who don't know how to manage money, clients who don't want to do any proactive decision making for the money they'll leave behind, new clients who want less interaction and who don't want to delegate decision making [to you], a more competitive marketplace due to robo-advisors and hot competition for anyone under 50 years old who has investable assets," Marston summed up.
Deep listening
For some advisors, expanded understanding of client needs can be a radical change. "The financial advisors I'm working with have somewhat of an old model [that assumes that] presenting the facts and figures should be good enough," said Ted Klontz, founder of the Financial Psychology Institute in Nashville and a psychologist who specializes in behavioral change. "But the younger generation is looking for relationships. Financial advisors who are focusing on what that means and how to do it are ahead of the game."
The difficulty with many nontraditional clients, Klontz said, is that "they really don't know what they want. They say some words, trying to convey an image of what they want," but they haven't reflected enough to be clear about it. As a result, the plan they end up with may not address their inner dreams, hopes and desires.
"I always say that if the client is not following the plan, it's not really their plan," Klontz said. "Once you get a clear picture of what you want, nothing will stop you. If it's not a clear picture, anything will stop you."
To develop plans that clients will embrace, you may need to delve deeper to figure out what they are really saying. "Advisors need to do deep listening to serve their clients well," Klontz suggested. "I call it exquisite listening." He explained that this doesn't simply mean being quiet when the client talks. You need to really listen, not be thinking about how you're going to respond.
Does this mean taking a lot more time with clients? "Not necessarily," said Klontz, who conducts listening workshops for professionals. "Many of my clients I see only once, but I listen deeply to what they want and need. Anybody can do it with practice."
Staying mentally and professionally flexible
The most important thing advisors should know about nontraditional clients is not to make assumptions, noted Carolyn McClanahan, who is president of Life Planning Partners in Jacksonville, Florida. "Listen and learn about the family structure and interaction before you suggest any action," she counseled. "The No. 1 rule is not to stick your foot in your mouth."
For example, if a client starts talking about her newly graduated son, don't ask if he has a girlfriend. He may be gay. "Ask whether he has a significant other," McClanahan suggested. "By your language, you show your openness about alternative family styles."
Sensitivity and resilience are key in dealing with multiple generations. You may already be providing some services along these lines. "We do very basic work with children and grandchildren as part of our client agreement," McClanahan said. "Let's say there's a daughter who just graduated from college and needs to make decisions about her 401(k). We'll advise her free of charge. Spending a few hours like this is a great way to develop a connection." If parents later need assistance as they age, you'll feel more comfortable communicating with the children. The kids will feel more comfortable with you, too.
Working with nontraditional families may also require flexibility in how and when you meet with clients. McClanahan ticked off some examples: "Using a lot of video conferencing; being ready to meet in off hours and across different time zones; being willing to embrace things such as social media; and having online portals where clients can have easy access to their information."