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Working with low-net-worth millennials

Matt Pais

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Heather Lindsley focuses on young clients with limited funds.
To some clients, a small percentage change in fees will not make a huge difference. For millennial clients — many of whom are early in their careers and figuring out how to pay off student loans, purchase a home and save for retirement all at once — that change could strongly impact how they feel about working with an advisor.

Heather Lindsley, LUTCF, RICP, a three-year MDRT member from Green Bay, Wisconsin, has done a lot of thinking about this. Her primary market is clients in their mid- to late-20s — a result of entering the business after her friends and family already had advisors, leading her to work with her friends’ kids and their friends.

“It’s exciting to work with that demographic because their minds are new and open,” Lindsley said. “There’s not a lot of financial literacy in schools, so there’s a lot they don’t know. They ask a lot of questions and want to be educated.

“To see them get excited about what could happen in their future is pretty cool.”

Client-targeted strategy
This particularly happens when Lindsley talks with clients about what she calls the “be your own bank” approach to life insurance, in which clients buy a whole-life policy, take loans from that cash value to pay for cars or vacations, then pay themselves back the loan. “It’s like a win-win-win,” Lindsley said.

Some clients are so enthusiastic about this concept, in fact, that they ask to put more in than Lindsley suggests. Lindsley then helps them understand that even if they can contribute $500 per month now rather than $300 per month, they will have to maintain this for a long time.

That likely will become more difficult once a house, spouse or kids come into the picture in the future. And if the policy lapses, the money becomes taxable and the benefits of this approach fade away.

So if a client asks to put additional money into the policy, the answer, Lindsley said, may be, “Yes, but no.”

Adapting to regulation
Lately, her primary concern relates to a similar but different aspect of limited assets. Changing U.S. regulations may adjust investor rules in ways that increase the fees clients will have to pay as they approach the $5,500 minimum for Lindsley to put assets into a management profile.

Because some of these clients already struggle to create these savings models, regulation that requires them to pay more fees more frequently makes them less inclined to work with an advisor and gives the advisors less ability to work with these smaller clients.

As of now, Lindsley has limited how much she communicates with clients about these issues because of the uncertainty of the regulatory changes and the case-by-case circumstances of each client. “Most of them don’t understand how the fees are paid anyway,” she said. “If the government says this is the way I have to do this, it simplifies how I communicate that to the clients. Right now, it’s more me getting over it in my head.”

What’s important, she said, is ensuring these clients do not neglect their savings or resort to robo-advisors — which will not be able to calm their concerns when the market goes down. This is especially true considering how challenging it can be to find time in a millennial’s schedule for in-person meetings.

“They are very busy and don’t necessarily want to meet in person,” Lindsley said. “It’s hard to work on a retirement plan if you don’t have an in-person connection and see what they’re thinking. Sitting across the table, you can see if they are understanding; on the phone or in email, it’s harder to see when they’re missing something.”

Making meetings work
This is why Lindsley has worked to schedule meetings with these clients in a social setting: coffee at breakfast, lunch appointments, happy hours. “I meet them more on their level, as opposed to an appointment at an office,” she said. “It makes them a little more comfortable. I think there’s some intimidation that comes along with the stereotypical advisor in an office, like a doctor or dentist.”

That is all the more reason why Lindsley wants to ensure that if fees increase, her clients question the notion that they cannot afford to save.

“I think that’s an excuse that people can use at any age, that there is something more important that you need to pay for,” she said. “In the end, it doesn’t matter what it costs; if you don’t do it, the cost is you have no retirement. I don’t think that is an option.”

Lindsley knows regulation may change the amount of time she can spend with certain clients, however. To establish different levels of service for her practice, Lindsley, working in the passionate, Packers-supporting football town of Green Bay, breaks down her offerings into “pregame” (clients with less than $50,000 under assets receive an annual review via letter or phone, but Lindsley spends no time herself ), “kickoff ” ($50,000–$250,000 in assets, more in-depth service) and so forth.

What if someone comes in and is not a football fan?

“That pretty much doesn’t happen in Green Bay,” Lindsley said.

Heather Lindsley

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