If you haven’t put the 17 July in your diary then chances are you were born before 1980.

    The date denotes World Emoji Day (yes, that's a thing) and what's more, a youth trend survey in 2016 found that 78 per cent of millennials find it easier to express emotions via emojis rather than the written word.

    Millennials tend to get a poor press, and the cynicism largely comes from their Generation X predecessors. 

    Yet millennials have the ability to shape the future of financial services - both as future clients and as the new wave of adviser business owners.

    It's worth saying here we shouldn't necessarily assume millennials are young. In two years' time a millennial may be turning 40, with a steady well paid job and in need of financial help.

    Let's first of all look at the potential of millennials as future clients. Many advice businesses may have ruled out this cohort as clients on the basis they don't have enough money to invest. This is true in the sense they are lumbered with unprecedented levels of student debt, and at least in some parts of the country, will be faced with the high cost of renting due to not being able to buy a home.

    But a Royal London/ YouGov report last year came to a different conclusion. It found that between £400bn and £500bn in wealth is held by home-owning grandparents, wealth which is set to cascade down the generations to the benefit of millennials in the coming years.

    While some of the wealth is likely to being passed down to parents, the research also found the majority of this group expected to pass some or all of their inheritance straight on to the millennial generation.

    With that in mind, the nurturing of millennial children of higher net worth clients seems to be a reasonable strategy. This is particularly the case when you add future wealth to the US statistic that 66 per cent of children who inherit their parents' wealth sack their parents' adviser.

    The most common reason given by the children was there was no relationship between themselves and their parents' adviser. Interestingly, when questioned advisers claimed the reason there was no relationship was because the inheritance would be spent too quickly or the amount was too small.

    The Pareto principle, otherwise known as the 80/20 rule, states that 80 per cent of the effects come from 20 per cent of the causes. If we believe the Pareto principle applies to advice, that would then mean 80 per cent of adviser fees come from the top 20 per cent of clients.

    Assuming the US statistic for children firing their parents' adviser is broadly true for the UK, if 66 per cent of total client wealth is set to leave then this is a hole in advice businesses' finances that cannot be readily replaced. The stress on a firm's level of assets under advice then becomes apparent.

    The next wave of clients and adviser-owners

    So how can you best engage with millennials? Other than use digital marketing, I have started to see firms use their existing team of younger planners to work with millennial children.

    If this isn't currently viable within your business, then it's worth looking to recruit those younger advisers that can plug the gap. This is especially relevant when it comes to the matter of exit strategies and how millennials can help.

    As business owners get closer to the point where they want to sell their business, the question of how to exit becomes paramount.

    Typically a consolidator firm or another local adviser may be stepping in to take over the business. But before a seller can get to that point, there are likely to be intense negotiations around what the business is actually worth.

    Questions such as the average client age and who is looking after the children of your clients can be used by the potential buyer to 'soften' the valuation in the owner's mind, especially when the stats around children firing their parents' adviser are readily available.

    Another option would be to sell the business to a younger generation of employees. Yet as many millennials can't realistically afford to buy shares in a business, this may lead to a division within your team between those that can afford to buy in and those that can't. This in turn creates a ‘have and have not’ culture, which is by no means an ideal working environment.

    Chris Budd is championing the employee ownership trust model, having been through the process himself with Ovation Finance. This approach to succession planning allows owners to pass down shares and take a back seat, while also getting an independent valuation of what the business is worth as part of the process. 

    In this way, millennials can become the next wave of business owners and help shape the financial lives of the next generation of clients who, crucially, will be their own age.

    For more on this topic, you can read the UBS wealth management white paper: Millennials - the global guardians of capital

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