An Open Letter to Advisory Firms Losing the Millennial Marketing Battle

An Open Letter to Advisory Firms Losing the Millennial Marketing Battle

Written by: 

Dear Adviser,

I’ve spent my whole life as a millennial, or at least as long as the generational classification has existed, but you haven’t seemed to notice. Your ads and your marketing materials prove you don’t understand me.

My financial decisions don’t make sense to you, because you don’t understand the context in which they were made. You probably don’t understand why I’ll spend $50 on a bottle of wine, $100 on dinner on Saturday night and $75 on brunch the next morning, but I won’t pay $80 per month for cable. While logic would suggest that the former expenditures dictate the latter deficit, the real explanation is that substitute goods are available.

I grew up with Napster. I helped kill fye and Sam Goody. Why? Because it was free and easy. I could download any album or movie for free in a matter of minutes. So when it comes to paying for cable, it’s not that I can’t afford it – it’s that I don’t value the service at the market rate. I prefer cheaper alternatives that offer similar value. But, I can’t get free wine and I have yet to find a low-cost, fine dining experience.

Further compounding my preference for value is the fact that, for the majority of my adult life, I’ve had the ability to instantly check prices on my smartphone before I buy. I have no brand loyalty. I’m not above walking out of a store when I pull out my phone and find a better price online. More often than not, I can wait for two-day shipping.

Adviser translation: If you don’t have financial products or advice that add value for me, I’m going to buy low-cost ETFs or mutual funds. Passive funds are cheap, easy and readily available. Vanguard is Napster for advisers. If you can’t give me value above what I pay for low-cost funds, then I have no reason to buy your product. And remember  if there are substitute goods available, I don’t need to go to your competitor’s office or request a prospectus by mail to find the costs. I can find fees on my phone while I sit in your office. If I find a better offer, I won’t hesitate to walk out of your office and buy lower cost funds on my smartphone from the parking lot. Maybe that makes me a sophisticated investor, or maybe it’s become too easy not to be.

Yet, value is only one piece of the puzzle when it comes to understanding me. Advisers also need to recognize that I have a general distrust of all things Wall Street. According to a 2016 survey by Harvard University Institute of Politics, I’m not alone. In fact, only 11 percent of millennials surveyed said that they trust Wall Street to do the right thing all or most of the time. Even more alarming is that 42 percent of millennials said they never trust Wall Street to do the right thing.

The explanation is simple. We watched as our parents profited from the Clinton Era expansion in the 90s, only to get crushed in the Dot Com bubble. By the time that 9/11 cleared and conditions started to feel “normal” again, the housing crisis lead to the Great Financial Crisis. Consequently, the market narrative throughout the entire duration of my memory has been dominated by two major asset bubbles. Today, with many indices at all-time highs again, I can’t help but worry that I will end up in the same boat as my parents – worrying that I will be forced to delay retirement because the latest asset bubble coincided with my retirement plans, leaving me at a loss while Wall Street profits.

Adviser translation: I understand that investing has risks. I get that markets are cyclical. But advisers need to understand that I’m more skeptical of the people involved in the financial industry than the actual products they sell. This doesn’t mean that I believe everyone working in finance is inherently untrustworthy, but my cynicism is the manifestation of an availability bias that skews my default sentiment toward an overemphasis on the outcomes of recent events, namely the most recent financial crisis. I’m looking for an adviser who presents genuineness from the very first second. There are no “genuine” mutual funds or ETFs, but there are genuine people. I want to know that my money is being managed by people who only have my best interest in mind. As soon as there is any question about intention, you’ve lost my attention. One of the best ways to earn my trust is transparency. Performance-based fee structures can also help convince me that our incentives are aligned. Most importantly, I want an adviser who is upfront and articulate about where they add value and where they do not.

My final suggestion is that you stop broadly catering your marketing efforts to millennials. I was born in 1986. I had to yell, “Mom, hang up the phone! I’m on the internet,” until the early 2000s when we finally got DSL. I didn’t get a cell phone until I was in high school. And, yes, my classmates were amazed that my Nokia 5110 had snake.

But what about the kid born in 1999? They never saw a bag phone. Fax was dead before they ever used it to order lunch. They grew up on smart phones and broadband internet and have never heard the sound of dial up router. That fact alone helps explain why you won’t find me regularly checking Instagram or Snapchat, but many of my younger millennial brethren use those platforms incessantly.

Adviser Translation: Millennials are the largest and most diverse generation in history. If you look at millennials as a homogenous group, you will miss your target because your message will lack nuance and personality. I’ve worked with many advisers who think they are well positioned to attract a younger client base simply because “they’re on social media.” The reality is that the vast majority of brands don’t get traction simply by posting on Facebook a few times per week. If you’re going to stand out, you need to start with a more specific targeted audience. Take time to understand our motivations. They probably aren’t that different from your own motivations. Keep in mind that you experienced the last 20 years, but for millennials, the last 20 years was their only experience.

The bottom line for advisers who want to market to millennials is that context always matters. Gurus and marketers throw around buzzwords like “authenticity” and “influencers,” but all too often they overgeneralize the target group and fail to integrate the experiences that motivate behavior.

To avoid these pitfalls, pick a specific group where you feel you can add value. For example, target “single, college educated, urban, females, between the ages of 27 and 31.” Avoid weak target groups like “millennials with retirement savings who want help investing.”

Once you have an audience, find a way to state your value proposition that appeals to it. If you can’t state your value proposition in a single tweet and justify why it is particularly appealing to your specific target audience, you need to go back to the drawing board.

But I worry that great marketing might not be enough. The savviest advisers are already demonstrating their value to millennials. They may not be using the same methods and business models, but they are making an effort to build trust with new audiences.

Adviser translation: Some firms are offering a robo adviser to the children of existing clients. The idea is simple – get kids hooked on investing early by giving them an early stake in their financial future. In doing so, advisers are building trust by demonstrating the benefits of investing. And what better way to tap into your existing client network? Also using technology to strengthen client relationships is United Capital’s Financial Life Management. The product is a suite of applications that advisers can use to shift the conversation from “What financial products fit a client’s risk profile?” to “What life choices matter most to the client?” This approach builds genuine client relationships and incorporates gamification elements that make the process feel more like deep self-reflection and less of an arduous chore. Finally, there are advisers who are attracting millennial clients by offering flat fee financial advice. XY Planning Network is one way that advisers can tap into this market. Again, the goal is building trust with potential clients early. For advisers, giving up minimums and commissions today could mean a much larger client base tomorrow.

The key seems to be offering millennials the tools to start investing today, while maintaining a relationship so that you’re first in line when they have more complicated financial needs in the future.

If you can digest all of that, you’re well on your way to better understanding me and having a shot at being my advisor.



Joe Anthony
Public Relations
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Joe Anthony is a PR Strategist with 12 years experience in public relations and financial communications. He is responsible for leading the agency's financial services PR unit ... Click for full bio

Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds

Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies, J.P. Morgan Asset Management

A quiet revolution is taking place in the alternatives world. The idea of alpha/beta separation has finally made its way from traditional to alternative investing. This development brings with it a more transparent, liquid and cost-effective approach to accessing the “alternative beta” component of hedge fund return and a new means for benchmarking hedge fund managers.

The good news for investors is that the separation of hedge fund return into its components—rules-based alternative beta and active manager alpha—has the potential to shift investing as we know it. These advancements could democratize hedge funds and, at long last, make what are essentially hedge fund strategies available to all investors—even those who aren’t willing to hand over the hefty fees often associated with hedge fund investing.

A benchmark for alternatives

With respect to traditional equity investing, we have long accepted the idea that there is a market return, or beta—but this hasn’t always been the case. Investors used to assume that to make money in the stock markets, one needed to buy the right stocks and avoid the wrong ones. The idea of a market return independent of skilled stock selection seemed ridiculous to most market participants. Yet today, we would never invest in an active manager’s strategy without benchmarking it against its respective beta.

Interestingly, hedge fund managers have been held to a different standard. Investors have been much more willing to accept the notion that hedge fund strategy returns are pure alpha, and that their investment returns are based entirely on the skill of the fund manager. That notion explains why investors have been willing to accept a “two and twenty” fee structure just to access what has been perceived as one of the most sophisticated and powerful investment vehicles available.

In thinking about the concept of beta, consider its precise definition—the return achievable by taking on a systematic exposure to an economically compensated risk. In traditional long only equity investing, the traditional market beta has been further refined as a number of other risks have been identified that are commonly referred to as “strategic beta.” These include factors such as value, momentum, quality and size. But no one ever said that these risk factors must be long-only.

Over the past decade, as more hedge fund data became available, academics began to disaggregate hedge fund return into two components: compensation for a systematic exposure to a long/short type of risk (alternative beta), and an unexplained “manager alpha.” What they found is that a significant portion of hedge fund return can be attributed to alternative beta. That fact has turned the tables on how we look at hedge fund return. With the introduction of the alternative beta concept, hedge fund managers will have to state their results, not just in terms of total return, but also as excess return over an alternative beta benchmark.

Merger arbitrage—an alternative beta example

The merger arbitrage hedge fund style can be used to illustrate the alternative beta concept. In the case of merger arbitrage, the beta strategy would be the systematic process of going long every target company, while shorting its acquirer. There is an inherent return to this strategy because the target stock price typically does not immediately rise to the offer price upon the deal’s announcement. This creates an opportunity to purchase the stock at a discount prior to the deal’s completion. The premium that remains is compensation to the investor for bearing the risk that the deal may fail.

Active merger arbitrage managers can add value by choosing to invest in some deals while avoiding others. Therefore, their benchmark should be the “enter every deal” strategy, not cash. In fact, the beta strategy explains the majority of the return to the average merger arbitrage hedge fund. And it doesn’t stop there. Other hedge fund styles that can be explained using alternative beta include equity long/short, global macro, and event driven. Note that the beta strategy invests in the same securities, using the same long/short techniques as the hedge fund strategy. The difference is that the beta strategy is a rules-based version that can become the benchmark for the hedge fund strategy. After all, if a hedge fund strategy cannot beat its respective rules-based benchmark (net of fees), an investor may be wiser to stick to the beta strategy.

Implications for investors

What does all this mean for the end investor? Hedge funds have traditionally been the domain of sophisticated investors willing to pay high fees and sacrifice liquidity. Alpha/beta separation in the hedge fund world means that investors can finally choose whether to buy the active version of the hedge fund strategy or opt for the passive (beta) version. Hedge fund strategies can be effective portfolio diversifiers. Now, through alternative beta, virtually all investors can access what are essentially hedge fund strategies in a low cost, liquid, and fully transparent form. For investors who haven’t had prior access to hedge funds, this could be welcome news. Not only can investors look at an active hedge fund manager’s strategy and determine how it has done compared to the systematic beta equivalent, they can also invest in ETFs that encapsulate these systematic strategies.

When looking at one’s traditional balanced portfolio today, there are plenty of questions around whether the fixed income portion will achieve the same level of diversification it has provided in the past. After all, with yields still low, there is little income return. Additionally, the capital gains that came from interest rate declines are likely to reverse. With fixed income unlikely to adequately fulfill its traditional role in portfolios, there is a need to find an alternative source of diversification. This is where alternative strategies may help. For investors seeking to access diversifying strategies in liquid and low-cost vehicles, alternative beta strategies in ETF form are one option.

Looking for an alternative to enhance diversification in your portfolio?

For investors looking to further diversify their overall portfolio, JPMorgan Diversified Alternatives ETF (JPHF) seeks to increase diversification and reduce overall portfolio volatility through direct, diversified exposure to hedge fund strategies using a bottom-up, rules-based approach.

Learn more about JPHF and J.P. Morgan’s suite of ETFs here


Call 1-844-4JPM-ETF or visit to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.
J.P. Morgan Asset Management
Empowering Better Decisions
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio