A business model for millennial clients

Off the back of a super popular post on XY discussing how advisers deal with fee sensitive millennials, we asked Chris Carlin and John Cachia - two Victorian advisers who work with millennials - to join us for an XY+ web event to share how they've built their business models and how they're articulating the value of their advice to younger generations.

How long have you had your business and who is your ideal client?

John - I've been in the industry since I was 14, and I've been advising since I was 20. I started my business AFA Group Wealth 12 years ago.

I saw early on in my career young adults weren't being serviced with holistic advice. Let's be honest, as an industry, we've come from a place of servicing those who had the biggest FUM. My target market are in their mid-30's and are people I call the 'Goats Cheese Eaters'. We all know the smashed avo generation. When you order smashed avo, you can either have it with feta or goats cheese. The people who go for goats cheese are willing to pay that little bit extra. This translates across to advise. I enjoy working with the 'goats cheese eaters', who are motivated to set the right financial foundations, and they're willing to pay more for valuable advice.

Chris - I've been in the industry for 10 years. I started out as a paraplanner and then worked as an adviser at a Big 4 Bank. Then a little thing called the Royal Commission kicked in and I saw the writing on the wall. I also wanted to do things differently, so I started Master Your Money Now in July 2018. I was really thinking about my mates and their finances, so I built my service packages specifically to help people who were like my mates. My ideal client is a nurse or teacher aged 26-32, and particularly those looking to buy their first home. I have 70 ongoing clients and I just hired my first full-time employee - a mortgage broker.

What's your process for engaging new millennial prospects?

Chris - From day one I have invested heavily (mainly my own time) into social media, and built some more traditional referral partnerships. Being three years into my business, I've now got quite a lot of client referrals coming in as well which is great!

A prospect can go straight to my website and book a complimentary 30 minute phone call with me. The aim of this conversation is to understand where they are at, where they want to be and so forth. I'll then book them in for a discovery meeting, which is a one hour Zoom or face-to-face meeting. I don't charge for this meeting, and prior to the meeting I send through a PDF outlining my advice process, the services I offer and my service package prices. Of those who attend a discover meeting, 75% become a client.

John - We have a three-step process which takes a person from a prospect to a client. To start, I'll jump on the phone for an intro chat. Before this conversation we make sure they've filled out what I call the 'Doctor's Clipboard' so I have enough basic data to know the kind of scenario I am walking into. This chat is really about them getting to know us, and us getting to know them.

One thing I find with millennials is they need to be educated on what we actually do. A question I will always ask a young prospect - "do you know what we do?". Eight times out of ten they'll say something like "you invest money and you take care of superannuation". I'll reply and tell them that's a small portion of what we do, and then take them through what we actually do.

The second session is the fact-finding session, which usually takes about 25 minutes. This is purely about hard data collection - current assets, liabilities etc. The third session is a road mapping session (goals and objectives). This usually takes 45 minutes - 1 hour. If a prospect progresses to a road mapping session, they've already bought into the process and will become a client. Because we've shown them the value. Not only are we getting the clients we want, we're getting clients who value our staff and refer more business. 

How are you bringing down the cost to deliver advice?

Chris - I do believe some advisers are using worse technology than James Cook had when he came to Australia. Having good technology behind you is really important. I'll give a shout out to my licensee Infocus who have built a bloody good background software called Platform Plus. It was only available for Infocus advisers, but external advisers can now use it too. This tech saves me about 2-3 hours per plan.

Outsourcing plans, hosting meetings online and leveraging technology are all things which make a huge difference to your bottom line. I've also been incredibly conscious of running a lean practice. My office rent is under $100 a week because I host most of my meetings via Zoom these days.

Another thing to note is working with a niche demographic can bring about efficiencies to your process. Given my clients have similar needs, most of my advice is super, insurances, cash flow - foundational stuff like that. There's a lot of repetition and similarities in the work I do, which helps in getting the plans done quicker and more efficiently.

How do you handle fee sensitive clients?

John - Our fees are our fees and we're not negotiating on that. Would you walk into a surgeon's office after they've quoted you $15k for back surgery and say "Hey doc, reckon you can do it for $10k?'.

I used to beat myself up about losing a prospect. I'd tell myself "I didn't get them over the line because I didn't sell it right, or I didn't show them the value". I actually was showing them the value, there's just some people who are searching for a magic diet pill to lose 20kgs without exercising or changing their diet. If someone is looking for a magic pill to get rich and not willing to pay for sound advice, that's on them.

As an industry, I'm also not yet convinced we are charging what we should be. My lawyer just sent me an update, "As of the 1st of May, our fees are going up to $585 an hour". I don't know about Chris, but I'm definitely not charging $585/hour. I believe we are still pricing ourselves too cheap. There is so much work that goes into delivering great advice to clients - the time involved, the value we create, the complexities of our client's lives and the advice we prepare. I stand by my fees, and if someone isn't willing to pay for quality advice, I don't want them as a client.

Chris -  I believe we've got such an advantage to be able to charge through super to help take the pressure off millennials paying for upfront advice. If I put a $3k fee in front of a nurse or a teacher, they'd probably be very uncomfortable with that. I'd probably be uncomfortable with that as well. But when I explain the cost can be partially funded through their super, it makes a huge difference.

Under my Gold Service Package, which is the package we use for clients saving for their first home, the upfront cost for a single is $550 from your bank account and $40/month ongoing. The rest can be funded from their super. I don't know about you, but I feel this is very reasonable. And if someone is not willing to make this financial investment in their future, then I don't think they deserve to be in their own home because they're not willing to invest in themselves.

I spend a decent amount of time demonstrating the value of advice with prospects I meet, and I have purposefully structured my service packages to accommodate lower income earners. If someone believes my services are too expensive, I am of the opinion they are not ready for advice.

Why do you work with millennials and not millionaires?

John - I love engaging with young people who say to themselves "you know what, I want to do something different. I want to make smart choices with my money". Helping young people set the right foundations now can help them live a life their parents never had by the time they are in their 40's. There's a huge cohort of Gen X and Y's who come from a background of seeing their parents only invest in property, and never receive financial advice, or only receive product-focused advice. We have an opportunity to make an impact with a generation who is motivated, who wants to learn and not make the (some of the) same mistakes their parents made. To play a part in that is pretty awesome!

Chris - I became an adviser because I wanted to help my mates. I wanted to help everyday people with their finances. This is why I love what I do, it's exciting. Helping people who think they won't be able to buy their first home make their dream a reality is really special. I have a teacher client who, when they first came to see me, had a negative financial position. It was heartbreaking to realise that, let alone explain it to them. Today, they're now worth over $100k thanks to an insurance claim and some other restructuring we've done. It's incredibly rewarding to be able to create outcomes like this for everyday people.

I think the joy of financial planning is that you can be an adviser however you like. If you want to focus on HNW, great. If you want to focus on millennials, you can absolutely do that as well. There is a business model for it.

We all know what you do in your twenties and thirties with your finances makes far more of a difference than what you do in your fifties and sixties. This is what I'm passionate about, it's what gets me out of bed in the morning.