With the greatest wealth transfer in history happening, it is vital that any professional advisor looking to grow their book of business is able to connect with the next generation.
The generation currently holding the money likely already has their trusted advisors. They have had years of relationships and trust built, and have no reason to stir the pot (especially with interest rates generating the returns they are right now!)
This means that advisors looking to grow their practice are going to have to connect with those in the 30-50 year age range who are in the process of building their wealth, whether through family wealth transfer or self-created wealth. The reality is, many people in this age bracket are generating good annual salaries (especially with a tight labor market for skilled positions) but living in urban/suburban markets where there are still large mortgages (and again those pesky interest rates), and potentially education-based debt. This cohort of people are often called “High Earners Not Rich Yet” (HENRYs for short).
This generation also tends to have more of an ‘enjoy it while you can’ mentality, where they have grown up watching their parents at work for many years, likely at fewer places of employment than what is typical now, and who are just now starting to enjoy the fruits of their literal labor. This leads to higher discretionary spending on consumables and experiences, for example, being comfortable with leasing or financing higher-end vehicles.
As advisors, how do you connect with these folks? What do they care about? How can you support them?
It’s Not Just About Retirement
Unlike the generations nearing or currently in retirement who focused on working for decades and then enjoying it ‘someday’, HENRYs are not solely prioritizing retirement savings. Positioning and creating financial plans and advice based on setting aside discretionary spending and educating them on appropriate levels of such spend is the key. In other words, appeal to the idea of “once we cover the bases of paying off debt and setting aside some savings, this is what you have left to play with.” This becomes much more interesting than knowing how much you’ll have in 20 years for retirement.
Minimizing Taxation Now
The value of having professional advisors for this group is to produce immediate additional value so more can be consumed or more debt can be paid off now. A majority of this generation of HENRYs are salaried employees and therefore being taxed at marginal tax rates at > 40% depending on their place of residence. Taking the pain away by focusing on strategies that reduce income tax in the present is meaningful.
Be Digitally Savvy
This group has spent their whole adult lives working in a connected era. Work has always been digital for them. Being able to leverage technology as part of the planning process to easily explain complex concepts is vital.
For this generation who have or will become part of a business ownership structure, understanding the value of their business asset is important to see how to generate the wealth they don’t yet have. For example, tech platforms like interVal have a specifically tailored logic for medical corporations because so many of these HENRY types are in that industry where they are earning meaningful income but still have lots of student debt, a mortgage, and have had less time in the workforce.
These HENRYs are comfortable using apps, email, and text messages, getting a lot done personally and professionally through their cell phones. Being able to provide them with digital-led communications is a step that old-school advisors are still struggling to evolve from and is a differentiator in the space.
As you look to grow your practice, now is the time to invest in bringing on HENRYs so that in 10-20 years you are reaping the rewards.
Author: Dave Bunce CPA, CA
Director of Partnerships, interVal
