Conventional wisdom says that “Old Guard” financial advisors from established Wall Street firms like UBS, Morgan Stanley, Merrill Lynch and Wells Fargo Advisors are doomed when it comes to the great wealth transfer soon to fall to the millennial generation.
After all, the argument goes, millennials witnessed the dot-com bust and the financial crisis, and many saw their parents’ nest eggs evaporate, leaving only distrust toward brokerage firms and banks in general.
Moreover, these old-money firms are tragically unhip: stodgy, white-glove services that don’t appeal to a tech-savvy, mobile-first generation. These crisp-suited, well-coiffed “advisors” are perceived as commission-driven sales operators that not only don’t sit on the same side of the table as their clients, they’re not even in the same zip code.
Not to mention some of these firms have mandatory minimum asset levels of $250,000 or more to even speak to a full-service advisor, which isn’t feasible for the younger generation. Millennials are being wooed away by upstart online investment apps and younger registered investment advisors, so by the time a full-service firm will deign to talk to them, these clients have already established relationships with faster, nimbler and more “relatable” advisors and advice platforms—or so the argument goes.
But many advisors working in Wall Street’s wirehouses say that’s not an accurate take. They are not concerned about the stigma of being considered a client’s “father’s financial advisor.” They noted that most are dually registered and do financial planning for a fee, with access to better technology than many smaller firms. And in fact, some of the biggest perceived drawbacks could be strengths when it comes to courting millennials—mainly, access to a full suite of banking, lending, investment and advice, all coordinated under one point of contact and tailored under various service levels to the client’s needs.
Joe Nadreau, managing director of independent brokerage and platform services at Wells Fargo Advisors, said that the company is banking on the evolution of its client base to millennials and Generation X in the next 15 years by trying to capture the client relationship across the wealth continuum.
To be sure, Wells Fargo’s recent wave of scandals means a harder job earning trust from potential clients, particularly naturally skeptical millennials.
But client memories can be short, and Wells has poured hundreds of millions of dollars into upgrading its digital user experience, relying on millennial focus groups to guide the effort.
Wells Fargo Advisors’ training program has also evolved: It too is built on a digital platform, and new advisors sign on to an apprenticeship model (a model that, Wells executives maintain, is favored by millennials), as opposed to the timeless tradition of handing a recruit a phone book and having him or her cold-call clients.
The average age of a Wells Fargo Advisor is just under 53, but the company's Next Generation Talent training program, which debuted in 2010, has an average age of 32. The company said that 1,800 of its employees have become FAs through the program. According to a J.D. Power report released in July, the average age of financial advisors in general is 55.
It’s also launched a new service for independent RIAs, acting as their custodian and broker/dealer. So far, only four teams have signed up with the service, and executives expect another seven to join by the end of the year, according to a published report. But it’s a sign of Wells Fargo’s stated strategy to operate in all business channels where financial advisors reside, not just the traditional brokerage model.
“If you can see the writing on the wall, as [current] advisors retire or die, moving those assets from those that are leaving the business and try to get those [assets] in the hands of younger generations, there is going to be such a massive wealth transfer [of wealth] into Gen X and millennials that we are trying to match their expectations both digitally and operationally with advisors receiving the transfer who can deal with them in terms of what they’re looking for and be digitally proficient, that’s part of the game,” Nadreau said.
David Poole, consumer investments solutions and client services executive at Merrill’s parent, Bank of America, said as millennials have become the largest percentage of the workforce, a “younger look” has become a focus at Merrill.
In fact, parent Bank of America is transitioning more of its financial service associates to Merrill’s advisory offices. It announced in April that it would be hiring 300 new financial solutions advisors to work in Merrill branch offices alongside Merrill financial advisors. The recalibration is directly intended to capture more business from younger generations. “We’re seeing more millennials who are very interested (automatic investing) but also appreciate the advisor interaction, and we are adjusting our resources to meet that demand, focusing also on the increased demand of our corporate clients supporting millennials” with advice on their 401(k)s. A spokeswoman added that the new advisors' "primary responsibility is to manage client relationships, help clients determine life priorities, and guide them with advice and solutions, including Bank of America’s core banking, lending and our Merrill Edge Self-Directed and Merrill Guided Investing offerings to help them pursue their financial goals."
Merrill has also lowered its barriers to entry in an effort to offer more planning services at all levels of client wealth. For a minimum of $20,000, Poole said, clients can have access to an advisor as well as Merrill-curated portfolios via Guided Investing, which is a digital and advisor hybrid offering that offers a choice of portfolio options that are determined by Merrill's chief investment office and includes five ESG portfolio investment options aimed directly at millennials, who, the firm contends, are more interested in socially conscious investing.
The company’s research shows that more millennials want the human touch you get with a financial solutions advisor—which is a step below an actual Merrill financial advisor—so the company this summer introduced Guided Investing with an Advisor which gives more basic planning to less complex clients.
But despite banks' efforts at courting millennials digitally, the number one way some traditional financial advisors say they are making inroads into the millennial market is still by latching on to the children of existing clients.
This strategy has its benefits. There is no advertising necessary to bring the children of existing clients into the fold, nor are there any overhead costs. Simply speaking, this is a captive audience that is free for the taking. But the stereotype of children walking away from a parent’s advisor as soon as they inherit the wealth still largely holds true. Sandra McPeak, a Wells Fargo advisor in Rolling Hills Estates, a leafy suburb of Los Angeles, said that a third of her business is made of up these children of existing clients.
According to McPeak, “the irony is that [millennials] really need help more than older people but are usually not as well attended to. What I found works really well, from working often with their parents, is to talk about things that they may want to share with kids.”
So “it starts out really in my case trying to educate the parent,” but “the number of my clients who have millennial children who then become my clients is about 25% to 30%.” She added that “that’s a high conversion rate for someone who is not actively recruiting millennials.”
McPeak said that Wells’ grandfathering program, called the Multigenerational program, which allows her to take on children of existing clients regardless of income and waive all of the access fees that the bank would traditionally charge them for holding less than $250,000 in assets, also helps her keep younger clients.
Hollis Montgomery, a Morgan Stanley financial advisor in Atlanta who is a millennial herself, said that while the millennial children of older clients are a tech-savvy generation, “they still want a face they can talk to. It’s the WebMD effect: you hear all of this information, but you need someone to personalize it for you.”
What's more, the wirehouses all have banking relationships, allowing these firms to become a one-stop shop for a client’s financial needs regardless of where they are on the lifetime wealth trajectory.
“These are busy people,” Montgomery said. “We have a very strong banking platform so we’re able to be the center of your financial universe. A lot of our success is based on being a one-stop shop.”
Nadreau of Wells Fargo Advisors said that the company's strategy is based entirely on being a one-stop shop, and that this capability creates stickier relationships. "It creates a level of client satisfaction that is hard to beat and that leads to retention," he said.
Bank of America goes so far as to incentivize the one-stop shop relationship with clients via a rewards program, said Poole. It works very much like a traditional credit card reward program but offers discounts on every Bank of America banking or investment service the client uses; the deeper your engagement with Bank of America or Merrill, the more rewards you get across the board.
Indeed, said Marielle Schurig, a UBS advisor in midtown Manhattan, understanding a client’s entire financial situation, from financial plans to mortgages, car loans and investment accounts, is key to appealing to the younger prospects. “There is a time and place for robos—but when I pick up the phone and call a 1-800 number and have to press a bunch of numbers to even get to somebody,” it quickly falls apart.
Ultimately, whether an advisor is at an RIA or a traditional national brokerage firm, how they are treated by the advisor will be the ultimate deciding factor, not the particular regulatory model that advisor works under.
“When you’re managing someone’s wealth it’s a very personal experience. You have to be able to pick up the phone and be able to talk to someone with whom you’ve had many conversations, who knows your family dynamics, your business dynamics,” she said. “There is a level of comfort with someone you know well."
Scott Smith, director of advice relationships for Boston-based research and consulting firm Cerulli & Associates, said in an interview that the wirehouses “definitely” have a shot at millennials. For players like Wells Fargo and Merrill, who have strong retail brands, “the important part is trying to convert that banking relationship into a wealth management relationship. If they can pipeline those younger investors into the wealth management channel, once they become attractive to a human advisor, getting them to the right person at the right time is key.”
Todd Taylor, regional managing partner for Heidrick & Struggles, a global consulting and executive search firm, agrees that the wirehouses do have a chance at capturing millennials. “Being able to capture wealth through different generations and being able to deliver across segments” of investing, from mass affluent to high net worth, “will give them the best organic growth, which they will need” to stay profitable.
