How do intergenerational communication skills aid the advice market?
One in 10 people born in the 1980s are set to inherit more than half as much money from their parents as the average person makes in their lifetime, according to the research from the Institute for Fiscal Studies carried out in 2020, yet many people do not carry on with their parents’ financial adviser.
The gap between advisers and young people could be narrowed with a better understanding of the range of communication skills – for example, advisers learning how they can best use interpersonal skills to ensure wealth transfer is continued with the same firm, if not the same adviser.
Barry Strathearn, compliance director at Lowes Financial Management, says it is important that all advisers consider social, cultural and economic variances between generations.
Strathearn says these factors can make productive communication difficult between what is now a multi-generational environment. He says: “While clearly not exclusive, an example is that baby boomers may prefer face-to-face meetings and speaking on the phone, whereas studies have shown millennials will often not respond to telephone calls and prefer digital messaging using smartphones and computers”.
Baby boomers may prefer face-to-face meetings and speaking on the phone, whereas millennials... prefer digital messaging using smartphones and computers
There are various arguments for and against hiring younger staff to ensure intergenerational wealth is passed on and clients are retained throughout the generations.
Dawn Mealing, head of advice policy and development at Fidelity International, says it is essential to hire younger staff to retain younger clients, and similarly to keep older staff for older clients. She says: “Comfort and trust often comes from identifying with people similar to you – but always on the assumption that those core interpersonal skills and the relevant technical skills to deal with the advice at hand are evident.”
However, Matt Stirland, director of later life lending at Age Partnership, says that while older customers tend to favour advisers with more life experience – for pensions and equity release in particular – it is not as simple as allocating clients to advisers in age categories.
“I think we have to be careful of not falling into stereotypes when discussing the pros and cons of young versus old advisers, as their successes are down to the skills and knowledge of each individual adviser rather than simply their age.
“For example, one of the earliest adopters to tech solutions during the pandemic was one of our oldest advisers. This adviser had several instances of using video technology to allow family members from different areas of the country to discuss the suitability of equity release for their loved ones.”
Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, also says there is a strong case for training staff with professional firms to develop listening and questioning skills. He said of the difference between generations: “This is simply the adviser’s ability to build rapport – most have this skill already if they are used to dealing with a variety of clients.”
Chan says hiring younger staff to retain business from the younger generation is not a necessity but a useful quick fix solution and does provide some succession planning for the firm, alongside fresh energy and ideas. He added, however, that there is potentially a higher turnover rate with younger staff and both resources and time are needed for training and supervision.
For Chan, older staff bring experience and authority in relation to community issues, but they “may not be interested in intergenerational planning as they approach the latter stages of their careers, so can be quite myopic in their approach”.
Advisers are faced with multiple perspectives when dealing with different generations, and potentially different life values, which can cause disputes. “Dealing with conflicts comes with experience,” according to Darren Dicks, executive director of wealth management and partnerships at Leeds-based Age Partnership.
“However, these soft skills can be improved through specific training and development, which is common in larger organisations”.
One way of planning to avoid conflicts or misunderstandings is to use interpersonal skills that are tailored to the client, according to Martin Stanley, chartered financial planner at Leicester-based Rowley Turton. He said that in explaining the same concept repeatedly it is easy to “get into the habit of trotting out a fixed spiel without checking we’re still connecting”.
Stanley says: “It is important to realise that a great many potential conflicts or misunderstandings – whether they are generational or some other factor – can be eliminated just by making sure that you are using the most appropriate wording, examples, or manner for each person.”
For Mealing, the effectiveness of advice depends on effective communication, which hinges on the fact that the advice sector is service-oriented, making relationship building crucial, which is, in her opinion, a factor that is true for any generation.
She says: “Interpersonal skills are some of the most important talents an adviser can have and, regardless of any generation gap, this is distilled down to personal touch, good manners, and an articulate prompting ability as a very minimum.
“The latter is important because advice to any generation often requires working through compromises and tough decisions.
“Other core skills are listening, being sensitive to the client and interpreting their body language. This is particularly important when dealing with younger generations who may not have knowledge and experience of financial matters or are potentially less skilled in articulating what they need.”
Dicks of Age Partnership says the challenge for the advice community is that many advisers do not see the value in the younger customer, so do not tailor their services towards them.
He notes that advisers in the wealth market who are successful in retaining the younger generation as clients, often provide free services to younger family members in the early stages, to foster the relationship with them.
“It is about incorporating the children in the advice journey when the parent is resolving how they want to protect and distribute their wealth. This is the opportunity for the adviser to show the value of advice.
“Many customers, and in particular younger customers who will not consider that they are wealthy enough for advice, focus on the cost and not the value. If the adviser demonstrates the value then there is more opportunity that children will retain the advice relationship.”
Strathearn says all firms need to be considerate of succession planning and it is important “to create harmony between the two generations and allow them to learn from each other”.
“One of the biggest pros is that the younger generation of advisers will be there to help support the clients through the full investment lifecycle and be there for the next generation. Younger advisers will perhaps be in a better position to help to retain the family as clients as the wealth moves down the generations.”
He adds that one of the negative implications could be clients looking upon someone younger as not having the necessary experience to deal with their finances.
“Older staff would naturally be more comfortable with the face-to-face and telephone meetings that baby boomers have a preference for. However, the converse is true in that they may not be fully appreciative of the communication needs of generation X or millennials.”
Identifying and managing vulnerabilities in the right way is a key aspect of an adviser’s role
Stirland of Age Partnership explains that within the equity release market, customers are often encouraged to involve their children in decision-making, resulting in the adviser explaining their recommendation to both parties in joint meetings.
“Identifying and managing vulnerabilities in the right way is a key aspect of an adviser’s role. Part of this is ensuring that the family is not having an undue influence on the ultimate decision-maker. Our advisers need to be able to ensure the advice is being delivered to the customer while educating the other members of the family and addressing any concerns they may have, but ultimately it is for the customer to make the decision.”
According to Stanley of Rowley Turton, sometimes circumstances mean it is likely for the client and adviser to have an ongoing relationship, and that involving the next generation as much as possible and as soon as possible is key.
“That might mean dealing with [clients’ children] as clients in their own right, even if it’s a slow start in terms of fees and profitability. More commonly, at a certain point, parents might think it sensible to include the next generation’s input into in some kind of inheritance tax planning, school fees planning and so on.
“One area where the generations always come together is when setting up powers of attorney – something which all advisers should be speaking to their clients about, especially in the later years.”
For many advisers dealing with intergenerational clients, the key tenet to keep the relationship functioning is the use of their interpersonal skills. Chan says that to help make sure younger clients are retained, advisers need to “develop relationships early and embrace technology and communication needs to suit younger clients”.
For Fidelity’s Mealing, communicating in accordance with the client’s preferences, keeping it simple but not patronising, is “an art form all advisers must hone”.
She says: “Some advisers may have interpersonal skills as a personality trait. If not, they can best learn through watching skilled practitioners and, of course, through practice.”
Strathearn notes that annual periodic meetings are an excellent way of fashioning relationships with the future generations, as well as being introduced to family members who may inherit wealth.
He adds: “By the time the next generation is due to inherit, they should already be a client who trusts the advice firm, because if they are not, the chances are they will be a client of another firm.”
Ruth Gillbe is a freelance journalist