Financial advisors are getting older, and they need to reconsider the way they approach clients from younger generations. The use of social networks and new methods of communication are essential if the industry wants to reach these consumers and offer them life insurance products.
At the recent Insurance and Investment Convention in Montreal, three experts suggested ways of selling financial products to young families and clients from Generation Y. Yan Charbonneau, president of AFL Financial Group, defines this age group as those who were born between 1980 and 1997. At about 1.3 million people they already form a large portion of the population, and by 2020 customers from Gen Y will be the age group with the most purchasing power.
“Selling life insurance by talking about protecting the future, that doesn’t mean anything to a Y. For them, something five years away is already a long way off. The end of life, that is much too remote,” says Charbonneau. Financial security and retirement needs are distant concepts. Advisors must adapt their rhetoric to reality, he insists. To change their approach to these young families and Y customers, firms must also recruit younger advisors.
This is the generation of the future. They are the ones who will control the market
With Gen Y clients, there is a strong temptation to put off major purchases in favour of other projects, such as trips abroad, or to invest in their education. “These are not always frivolous needs,” notes Michel Bergeron, a partner at Ernst & Young (EY).
Another factor that is not to be overlooked: the generation of workers under age 35 is already heavily in debt. The monthly payments that go towards paying student loans and credit cards, as well as mortgages if they are homeowners, take a heavy toll on their budget. When they are considering life insurance, they have already shopped around for minimal and inexpensive coverage. The surveys that EY has conducted with insurance company customers confirm the trend, says Bergeron.
Consumption patterns
He points out that consumption patterns are influenced by other industries, where consumers are rewarded with bonuses and points for even the smallest purchases. This trend should not be overlooked in the financial services industry. EY’s wealth management report on the subject, called Closing the Gap, clearly illustrates the difference in perception between financial advisors and their younger customers.
Desjardins conducted a study in 2013 in order to better understand the “mental attitude” of these younger customers. Nathalie Tremblay, head of health insurance products at Desjardins Insurance, finds that needs do not differ that much between one generation and the next. “When a child comes into the family portrait, an alarm goes off for life insurance needs,” she says.
Need for advice
But this awareness does not mean that young families are thinking about covering risks related to debts or tuition fees in the event of accidental death or serious illness. “It is the advisor’s job to explain the role of life insurance to the Gen Y client,” she says. “At this point, the client is not thinking about the future. He will understand if you explain that, should he die tomorrow morning, he must have life insurance coverage so that his children can, for example, live in the same house and the same neighbourhood. This is the instant generation.”
Studies conducted elsewhere within the Desjardins Group have uncovered the same kinds of behavioural differences as those mentioned by Charbonneau and Bergeron. “We see customers who have outstanding balances on their credit cards; they know very well that they require inexpensive life insurance products. They may have other unmet needs in terms of financial education,” comments Tremblay.
She notes that clients aged 18 to 24 give much more weight to the opinions of people who help them realize important life projects. If the financial advisor manages to become part of this process and can outline the steps that are required to ensure these projects come to fruition, then the door is open for discussion.
Processes and tools
Given the difficulty of reaching these young families, older advisors may be sorely tempted to forget about them. Michel Bergeron emphasises that this cohort will see its purchasing power increase in the next five years.
“This is the generation of the future. They are the ones who will control the market,” says Charbonneau. Older advisors may be able to sell them products, but they have to change their narrative. “There is nothing new in this. Any advisor must adapt his offering according to the clients he meets.”
According to Charbonneau, mentoring has its limits. Pairing an experienced advisor with a younger one is not always a good idea, because those who head the firm tend to hire people like themselves. “They want to have a young financial advisor with credentials, one who is not too pushy, who is not too much of a salesperson. After a few months, they say to us: ‘He is not selling.’ But that’s the person they hired!”
Charbonneau notes that in previous decades, the market was developed by first selling small policies to baby boomers. “You want to have a young advisor who sells policies? You have to equip him, and give him the means. However, you first have to hire people who sell,” he says. To develop new customers, he repeats that one must not use the same techniques that were popular 30 years ago.
Nathalie Tremblay builds on the same theme. If we send young families an experienced advisor who is used to selling joint, second-to-die policies to entrepreneurs, he will probably not be very interested in selling ten-year term life insurance.
Be connected
She emphasizes another point. “You must be connected! Y clients are members of specific networks that allow them to interact and develop a sense of belonging to their community,” she explains. If you manage to connect with them, she says they will spread the word about the quality of the advisor’s services.
As an example, Tremblay points to her 22-year-old son. The voicemail on his cell phone is useless because it is always full, and he does not listen to messages. However, he responds quickly to texts. As a result, she says we must offer different solutions to this kind of client in order to connect to him, including text messaging. The other two experts point out that even email is considered a slightly old-fashioned method of communication.
The first time we see a young advisor using his thumbs to type on his phone while he is in a meeting with colleagues, it is “a little surprising,” says Charbonneau. However, clients are using this medium to communicate with him, and they want a quick response.
Guide research
Despite the widespread use of the Internet, the business process in life insurance must involve meeting with an advisor, says Michel Bergeron. New ways of communicating and transmitting documents raise various compliance issues, but the important thing is to be aware of customers’ habits.
In Bergeron’s opinion, Gen Y clients want more communication, but it must be very focused and simplified. “Sending an email link to a site where you can download a 300 page document, this is not the right way to go about it,” he says. In the survey it released in November, EY found that only 7% of investors say they use social media to communicate with their financial advisors. However, the same survey found that 40% of advisors say they communicate with their clients through social media.
Perception gap
Bergeron believes this perception gap concerning methods of communication illustrates the importance of recruiting young advisors. Furthermore, the EY survey reports that younger advisors do not seem as satisfied as their older colleagues with the technological tools that insurers have made available to them.
Nathalie Tremblay believes that the advisor should play the role of coach and mentor. The advisor may suggest sources of information that the client can consult before meeting. A paternalistic approach should be avoided. If the client wants a term policy, one should recommend sites that explain the advantages and disadvantages of this product. “This requires concise information that is directly related to the purpose of the meeting. The customer will be more confident, and so will the advisor, since he has directed research instead of letting the client wander around on different sites,” she suggests.
The use of new technologies like video clips or chat sessions should not be neglected, says Michel Bergeron. Clients are used to these formats, and they are already used in other industries. “So we need to at least think about it and review our processes in terms of communicating with clients,” he says.
