Why They Can’t Be Ignored, and How to Reach Them
What’s the quickest way to alienate a millennial? Try and sell them something, says Douglas Boneparth, the 32-year old president at Bone Fide Wealth LLC and a millennial himself.
“The generation craves authenticity,” Boneparth said in an interview with Capital Ideas. “The second you don’t offer transparency and you don’t provide real objectivity, you’ve lost them completely.”
It’s a lesson the industry has been slow to learn. But not Boneparth. The son of a certified financial planner, he has built a reputation working with millennial clients in New York even as they are increasingly skeptical of financial advisors, according to a report from Bloomberg News. He started early, receiving his certification at 25. Since then he’s been named to InvestmentNews’ 2016 “40 Under 40,” with a business that oversees millions.
But it’s the future he’s most excited about.
While the industry continues to chase baby boomers, he’s focusing his practice and passion on his peers. Breaking through to a group left distrustful and apprehensive about financial management thanks to the financial crisis is not easy. Boneparth’s success stems not just from his affinity as a millennial. He’s worked hard to understand what’s shaped their mindset and drives their decision-making.
So, how has he managed to break through?
Understand Their Mindset
Boneparth has firsthand experience seeing how the recession hit this generation. He watched his wife borrow a quarter-million dollars to attend law school just before 2008.
“Suddenly, the stats the school showed her about how she was going to be able to find a great job when she got out, they were no good anymore. … She had no realistic understanding of how her financial life would look,” he said. “And it was happening to tons of my friends and her friends.”
No generation has relied as much on student loan debt, with 7 out of every 10 graduates coming out of college owing about $30,000. Almost half have loans totaling $40,000 or more, according to a 2014 federal government report.
“The damage to the generation is hard to calculate,” Boneparth says. “Many of them worked really hard, bet everything and got half the salary they expected.” But there’s a silver lining, he adds. “Because of the mistakes of their parents, they also value a real solid financial education. And that’s where the opportunity lies.”
Play the Long Game (Give It Away Until They Have Assets)
Boneparth says it takes work to reach millennials – and not many advisors are interested in putting in the time and effort. To build relationships with millennials, advisors should be transparent and focus on education.
“They want you to invest in them, as opposed to trying to get them to invest in you,” he says. “They want to be empowered. And the basis of empowerment is education.”
The majority of millennials have little to no savings or haven’t learned to budget, leaving them with almost nothing to invest. Boneparth says he works with clients to master their cash flow before considering investments.
“We get them planning-ready, show them how to build and use a budget and how to prioritize their goals so they can get to a point eventually where they are ready,” he says. “And we do it for free.”
About 70% of millennials say they are stressed and anxious when thinking about retirement savings and investments, but 40% of them have no retirement strategy in place at all for retirement, according to CNBC.
“If you show them that these goals are important, get them pumped up to apply themselves and give them the tools to do so, that is value,” Boneparth suggests. “You should want them educated. It’s the only way they will really know why an advisor can be so useful.”
Let Them See Themselves in Your Practice (Hire Someone Their Age)
The average financial advisor is 51 years old. And many may not be looking to extend their businesses beyond their own retirement.
But for those who want long-term growth, hiring millennials as advisors is one strategy to reach the younger generation. The value will play out over the long term. Although this generation may not have significant funds to invest yet, they will with time, as the great wealth transfer shifts money from baby boomers to their heirs. And they will want people who understand them to manage their assets.
“A 22-year-old doesn’t have the organic network to raise assets right away,” Boneparth says. “Investing in them is a risk. It’s 100% antithetical to the ‘raise assets or get out’ model that is so often the norm in the industry. But without that investment, you’ll never solve this problem.”