Serving the future digital generation will be different, and financial planners and advisers could be losing out on attracting the next generation of clients unless they start to reshape their proposition.
Digital is already a way of life for younger generations and the solutions offered by innovative tech businesses are making traditional products and services simpler, cheaper... and frequently, obsolete.
Financial advice and planning is not immune from this.
As we know, access to advice is mostly sought at a trigger event such as receiving an inheritance or planning for and reaching retirement.
Prior to this, experience of financial products is often limited to buying a house, a DIY Isa or maybe buying shares in Tesla and Amazon.
However, times are changing: that was then and this is now.
The digital players
Apps from the likes of Monzo, Chip and Plum have introduced spending linked saving plans and are starting to engage younger generations in ‘financial planning’ - a term I use loosely for the sake of this article.
What it means is these platforms are building a financial relationship with those using them in a way that traditional banks never could.
For those that aren’t aware, these companies let you do clever stuff with your finances; one example is allowing you to allocate to a savings account when you spend money.
For example, say you save 20 per cent on a £100 item, you can immediately allocate the discount to a savings account, including an investment account.
But they offer much more than this.
Will they make it work? I would guess so - Monzo has almost 5 million account holders to date, the vast majority of whom are likely under the age of 40.
So, fast forward a few years, and it’s not difficult to see how these businesses will expand their value proposition based around the needs of their maturing customer base. Needs that will include planning for retirement, investment planning and, dare I say it, full blown financial planning.
Rest assured they’ll do it well, predominantly digitally, and with a customer base with whom they already have a relationship, which is the important bit.
You may say it’s nonsense - Nutmeg have spent millions trying to achieve this. They have, but it’s different.
Nutmeg and co are struggling due to the high cost and slow rate of customer acquisition.
The aforementioned players won’t have this problem - they’ll already have the customer base, and will have spent years building affinity and a compelling relationship.
Engaging NextGen clients
What this all means is that when the next generation of clients inherits or starts to think seriously about retirement, they won’t automatically search Google for ‘financial adviser near me’.
They’ll play closer to home, take the route of least resistance and connect with their existing provider who will seem remarkably relevant to them.
Or more likely, having used artificial intelligence to pre-empt the need, their existing provider will have been proactive in delivering what the customer needs at every stage of life.
So how do you win over the next generation to ensure future opportunities for your own business?
The next generation of clients have different needs and wants, so understanding this is essential.
Create their persona (or avatar if you prefer), and then think about how a service and proposition could be developed to address their issues and challenges.
It could be as simple as helping them develop the right financial thinking and behaviours; developing the right habits that will set them on a course for a life well lived.
Creating a proposition that the next generation is willing to pay for isn't easy, particularly as an adviser’s proposition will likely struggle to compete with the fintech now available.
I’ve seen examples of monthly fees being tried and failing, but I've also seen that when positioned effectively and with demonstrable value, they work.
The focus must be away from products (and I’d include cashflow modelling as a product as it can be easily commoditised).
Advisers and planners need to engage with the next generation of clients in new ways, with services that focus on a client experience and a value exchange that is acutely relevant, fit for the future and that underpins the long term relationship.
If you don’t, you may just find yourself fishing in an empty pond.