Turning Young Investors into Long-Term Clients

Acquire the habits described in this article to start building long-term relationships with your younger clients.

By Bill McManus

The impact of COVID -19 has certainly brought many challenges for investors and financial advisors for much of 2020. Volatility and uncertainty have increased dramatically and are not likely to go away anytime soon.

These challenges can be especially magnified for young investors. Most members of the Millennial and even younger Gen X generations have never experienced these levels of volatility in the markets, let alone a full-on correction.

For the first time, they are experiencing some of the instinctual behaviors that are brought about by increased fear and anxiety in the market. Confirmation bias, the bandwagon effect and loss aversion can all affect decision making.

You add to that a surge in the volume, velocity and complexity of the information that is thrown at us on a constant basis, and we now have the recipe for a very difficult situation to navigate through.

Opportunity For Advisors

We also know that challenges create opportunity — in this case, the opportunity for financial advisors to usher in a whole new cohort of clients that they can help to reach their long-term financial goals. As mentioned before, this is the first real challenging market for many investors in their investing careers. A more than 10-year bull market run may have had many of these people thinking they didn’t need the help of a financial advisor.

Seizing The Opportunity

We now know that the landscape has changed dramatically. Advisors who are looking to capitalize on this tremendous opportunity should demonstrate three pillars:

• Caring: Many Millennial and Gen X investors haven’t experienced a full market cycle and are undergoing increased stress and anxiety as they witness drastic market swings. As such, it’s more important than ever for advisors to be empathetic in their approach, offering emotional support in addition to financial guidance.

• Coping: To effectively help new clients navigate these turbulent times and alleviate financial stress, advisors must offer relevant educational pieces and actionable plans that will help these clients feel in control of their finances despite economic uncertainty.

• In command: Advisors need to demonstrate that they are a trusted partner during this time by utilizing their full teams and offering solutions beyond investment management, such as providing access to outside resources. Doing so highlights the value an advisor can provide post-pandemic, potentially leading to a long-term relationship.

Embracing technology and setting client expectations are critical at this time.

Building these three ideas into a value statement sends a clear and direct message to new or prospective clients that you are a trusted advisor who can help them through this current, and, as we know, future, difficult market. We can combine empathy and know-how to demonstrate that we have helped other people just like them. That is a great foundation for a long-term client relationship.

Communication is key to developing new client relationships. As we know, we were already moving to a more virtual world before COVID-19. We have now seen the gas pedal pressed down to the floor and the acceleration of this new way of doing business shift into overdrive. This is especially true for these particular generations. Investing both our time and resources into understanding how to best embrace this rapid change is crucial for advisors who want to embrace this opportunity.

Like many of you, I cannot wait for the days when we are able to interact with clients in a more “normal” way. I do feel that at some point we will return to some semblance of that. However, there is no doubt that many of the adaptations we have made in response to this current crisis will become a part of our everyday efficient practices. Embracing technology and setting client expectations are critical at this time.

The challenging health and economic times brought on by COVID-19 have certainly disrupted all of our lives and our businesses. The uncertain long-term effects will undoubtedly add to difficult times ahead, but financial advisors who incorporate these ideas into their practices will certainly have tremendous opportunities to help more clients in a deep and long-lasting way.