Executive Summary
While the bulk of financial services has been focused on the baby boomer generation - as the saying goes, they're "where the money is" - an increasing acknowledgement is growing that at some point, financial planners have to expand their horizons to the Generations X and Y that follow. Not just because eventually, Gen X and Gen Y will inherit the remaining wealth of the baby boomers, but also because - in the case of Gen X at least - they're beginning to reach their peak earnings years, and build some serious wealth of their own.
In this guest post, Ted Jenkin of oXYGen Financial, an advisory firm that is squarely focused already on serving Gen X and Gen Y - and is doing so successfully - shares some of his own tips about how to serve Gen X effectively. From reframing away from retirement planning to "exit planning", to recognizing the importance of coaching outside of purely financial matters, to trying to bundle services not just for pricing but for efficiency from the client's perspective, Ted provides insight on how working with Gen X is different than generations past.
So whether you're looking to work more with Gen X clients, or perhaps figure out why you've had limited success trying to work with them already, hopefully this article will be helpful to you in considering how you might need to shift your services to serve Gen X clients more effectively. Alternatively, if you're just thinking about working with Gen X at some point in the future, this article should provide a roadmap of some of the services you'll need to consider - and expertise you must develop - along the way.
Generation X is classically defined as people born between the years 1965 and 1979. Pretty much those clients in their early 30’s to their late 40’s. When the first Gen X’er turns the age of 50, I promise you that many of the large big box financial services firms will begin to adjust their marketing campaigns as Generation X becomes more of a 'prime client' for their firms.
Having spent the past six years creating a firm in large part dedicated to Generation X, there are important items to pay attention to if you really want to win over these clients. This group is beginning to hit its peak stages of earning income and I can promise you that after seeing over 2,000 cases, this is by no stretch of the imagination a group that you should idly sit by and watch them be handled by your competition. Here are four tips that I can give you to help your business with Generation X.
TIP #1- It’s exit planning, not retirement planning
Whoever thought that the corporate ladder a Gen X’er worked so hard to get to the top of would end up being their worst nightmare? Many clients in their late 30’s to late 40’s are not as worried about retirement as they are figuring out an exit plan from the job they have grown to hate and move into something that they love. They would even consider doing a SEPP [72(t) Substantially Equal Periodic Payments] to begin income streams and allow a bridge to help them open up a new business or a consulting gig. Having other knowledge like using their 401(k) as potential funding for starting up their business is additional information that you will want to know in the future. Most of all, discuss work-optional and exit-planning versus retirement.
You’ll need more training than just the CFP® certification to help your clients with these types of issues. Although you aren’t a lawyer, you should beef up your skills around understanding entities and contracts. Whether you take a local community college course or a Fred Pryor class, expanding this specialized knowledge will make you more valuable to the Gen X’er client.
I would also suggest expanding your EQ (not just your IQ) by reading both Emotional Intelligence and Social Intelligence by Daniel Goleman. This will help you become better educated to sort through the complex maze of financial issues that are entangled with massive emotional life decisions. It’s going to be important that you have some ancillary knowledge about small businesses and home-based businesses, even if this isn’t your specialty.
TIP #2- Bundle sets of services
For most of the Gen X’ers, getting through their own financial plan and asset management isn’t a competency issue . . . it’s a capacity issue. TIME is the number one most important commodity. As family life, work life, and technology have stretched their time to the max, having a disconnected advisory relationship makes it more arduous for Generation X to do their financial plan. Whether or not your firm offers it, having the ability to bring in CPA’s, attorney, and property & casualty professionals so the busy Gen X’er doesn’t have to ride around town will make you increasingly valuable to this group.
Since most of our client base is in this generation, bundling is critical for your success. If you can bring this all in house (and your B/D allows for it), it will better serve you for overall client communication. You should consider how your CRM and overall technology will operate to ensure the communication is seamless from meeting to meeting. However, even if you engage in partnership relationships, you should attempt to get as many of these meeting done in your office as possible. Or, set up your technology to have Skyping, join.me, or GoToMeetings to engage all parties in the meeting if they are not available face to face. These clients will pay you a premium for your services to save them time. If you can make the partnerships financially profitable, that may be a consideration as well to add additional top line revenue to your business.
TIP #3- Life coach versus financial coach
Many of the Generation X clients you will bring aboard into your practice need much more than a wealth manager or a financial planner. Being skilled in understanding how to read job offers, benefits booklets, and overall business knowledge will be rewarded even more than being able to construct an asset allocation. You will want to brush up on understanding business entities, general day to day financial decision issues, and helping to plan for their parents’ long term care.
We’ve learned that setting up retainer fees with this generation is an excellent idea and they are more open to paying under a ‘fee’ structure than just having their advisor rely on making ‘commission’ product sales. We set up our planning fee structure on a monthly retainer basis rather than an annual basis as this generation thinks about their spending plan month to month rather than year to year. Separate the fee you spend on giving this holistic advice from what you charge for managing money. Some Gen X’ers will want you to do the full boat, whereas others will simply want you on their personal ‘advisory’ board.
TIP #4 Marketing needs to be done through experiences
Since this group is so busy, don’t bother trying to do a dinner at Ray’s Killer Creek steakhouse with a wholesaler. They can see right through this type of marketing even if you get them in the seats. Try going to a website like Living Social and looking at the experiences that you can recreate for prospecting or client appreciation events. Had you considered a glassblowing night? An iron chef night? How about sake tasting and sushi rolling? They will bring friends with them and you won’t have to sell them. Just make it fun.
Getting clients to these marketing events can be relatively easy if you structure the front end of your CRM system correctly. We have installed user-defined fields in Redtail CRM, and essentially implemented a Harvey McKay top 10 versus the original McKay 66. This allows us to gather strategic marketing data on what the client enjoys personally. In turn, we can create specific marketing events that we know clients will come to and bring new friends with them for us to meet. We also create a dessert style menu (think small black book) for clients during their service meetings so they can choose the event they would like to attend. This works well for us and of course we rarely miss an opportunity to highlight upcoming events in our social media, via MailChimp, and on our website.
This certainly isn’t an end-all-be-all list, but should give you an excellent head start on how to work with Generation X (without giving away all the secret sauce from oXYGen Financial!). As a reminder, the experience matters to these clients, so it wouldn’t hurt to get some 80s’ tracks going on Pandora when they come into your lobby. Who doesn’t love Dexy’s Midnight Runner "Come On Eileen" 30 years later!?
And if you want additional help on going after Generation X, please go to oXYGen Financial to request a consultation with one of the foremost experts in the country on providing financial planning services to Generation X!
Great post Michael and Ted. Thanks & Happy New Year.