They're young, they're skeptical, and they're used to getting lots of information from the online communities they've helped create. And now that their companies are being acquired or prepped for initial public offerings, they're also about to become very rich.
Meet the social media multimillionaires and billionaires, the Generation Y set that built and was first to understand the magnitude of social networking sites like Facebook, Twitter, MySpace and LinkedIn and the golden opportunity they offered financial advisers savvy and skilled enough to track them down.
For large investment houses and independent financial advisers, this new crop of potential clients — and the commissions they generate — is as elusive as it is exclusive.
They've tweeted about Bernie Madoff and IAG. They've seen the YouTube clips of laid off Lehman Brothers analysts wandering Lower Manhattan in a state of shock and bewilderment. They've "friended" Ben Bernanke.
Now that the economy is showing some semblance of recovery and the IPO market is heating up — IPO Monitor reported that 26 U.S. companies had filed with the Securities and Exchange Commission in the past two months — it would pay financial advisers to start figuring out how they're going to reel in some of these young, smartphone-addled whales.
"In a lot of ways it feels like the '90s all over again," said Stacey Haefele, the president and CEO of HNW Inc., a marketing firm that caters to premier financial services institutions, including the likes of Deutsche Bank, Charles Schwab and Prudential.
"Except this generation is a lot more savvy and can sniff out a disingenuous sales pitch from a million miles upwind." Haefele said.
Two weeks ago, LinkedIn, the supposedly more "professional" of the major social networking sites, filed for a $175 million IPO; Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase & Co. are lead managers for the offering.
Though this new generation of the superrich may have an arsenal of mobile apps at their disposal and an expansive network of "friends," colleagues and contacts, they are still young and still prone to making the kinds of investment mistakes that befell an earlier generation seduced by the long-term investment prospects of companies like Pets.com and Webvan.
"In general, these newly wealthy clients don't have a great deal of sophistication when it comes to understanding markets," Haefele said. "They've received the mass consumer message about money — 401(k)s and the like — but the problems they typically fall prey to [are] having concentrated stock positions and liquidity issues because they like to spend like they're rock stars."
From the broker-dealer and financial adviser perspective, getting at these coveted clients requires not only an appreciation for the social media in which they're so deeply entrenched but a willingness to actively participate in that world.
"You have to be where they are," Haefele said. "Be on LinkedIn and Facebook. They're telling you a lot about themselves in these channels. These are great resources for building up a prospect pool and finding out how you're already connected to them."
Financial advisers who may be spooked by Financial Industry Regulatory Authority guidelines for social media participation should adapt and just make sure they have the IT platform in place to monitor and save all their social media dispatches.
Haefele suggested that advisers read these potential clients' blogs and do everything possible to elevate their profiles so that they show up prominently on any Google search for "financial adviser" or the like.
Though this group of deep-pocketed potential investors is very small — maybe 3% of all clients — they are often so busy with their next entrepreneurial endeavor or social engagement, Haefele said, that the cost to serve them is minimal — and they are a referral gold mine.
"We talk to a lot of advisers," she said, "and what we hear is that these clients are among the nicest clients you can have. They've suddenly come into a lot of money and need advice, but they're not super-engaged. And they and their friends all got rich together, so if you can get one, you can get the others."
This story was reprinted with permission from
