Produced in partnership with Netwealth.
Millennials and Gen Z want to get financial advice from sources they trust, but that doesn’t automatically mean they’ll defer to a professional.
Research from CoreData suggests advisers risk losing approximately two-thirds of funds under advice as money moves between generations.
At the Netwealth Accelerate Summit in Melbourne last week, Flux co-founder Brett Joffe said the firm, which specialises in financial education, aims to help advice firms build stronger connections with clients “before someone on Tik Tok gets to them”.
Brett Joffe said that despite the intergenerational wealth transfer many financial advisers have very little or even no relationship with the future generation of their current clients.
“In practical terms, if you had $500 million in funds under advice that would move to $180 million in one generation,” Brett Joffe said, referring to the CoreData figure.
“Here’s the thing – when your clients reach that point of wealth transfer it’s often way too late. Rather than having to face this very daunting question about your practice, we really want to show advisers how they can engage with the next generation because as we love to say internally, if you want to retain intergenerational wealth clients you need to start building intergenerational trust.”
Netwealth acquired the financial education platform last year as part of strategy to expand into the mass market.
But both generations have different characteristics and Justin Joffe said when communicating witheither generation it’s important to factor in these differences.
“Millennials are currently between the age of 28 and 44, they grew up with The Simpsons, Friends, Harry Potter, MSN Messenger – and unfortunately – dial-up internet as well,” Joffe said.
“They have seen the transition from analogue to digital. They’re tech savvy, they’re experience driven and they also believe in purpose-led brands.
“When it comes to Gen Z they’re aged between 12 and 27 years old. They’ve never experienced dial up internet, they never had to wait for websites to load. They grew up on YouTube and TikTok. They’ve never known a world without internet.”
Despite those differences, Brett Joffe said there are three ways to engage with the next generation of clients.
“Content… that can build trust and authority; digital tools that provide instant personalised value to clients; and online playbooks [which] empower the next generation to take action with practical steps,” Brett Joffe said.
Brett Joffe said the reason advisers should care is because the ones are who proactive and “step up now” will have a “rare chance” to build lifelong relationships.
“We expect around three and a half trillion dollars will shift from baby boomers to future generations of Australians,” Brett Joffe said.
“We know from our experience there is an entire generation of Australians who are unprepared, underserved and also about to either build wealth or come into wealth. And as this shift happens, these people need trusted advisers they can turn to, to guide them and support them on this critical journey.”
But Brett said the challenge with engaging Gen Z and Millennials is trust and that doesn’t automatically come with the territory of being a professional.
“We recently ran a survey at Flux and we found that the majority of Gen Z and Millennials rely on a mix of family, friends and even social media for financial advice,” Brett Joffe said.
“While baby boomers have always preferred to take advice from people who are considered experts… financial advisers would be included here, what we’ve found is that Gen Zs would prefer recommendations from people that they personally trust.
“This is obviously a huge risk for those who take advice from someone they trust and may not be qualified to give that advice, but it’s also a huge opportunity for advisers and we know that advisers need to establish direct trust with next generation clients themselves directly.”
Brett Joffe said some advice practices hire younger advisers to target leads coming through, particularly from clients in the accumulation phase, but there’s also been another access point worth considering.
“We’ve also seen people hire mortgage brokers because they’ve seen that their next gen clients are so focused on home loans right now,” Brett Joffe said.
