How Advisers Can Rise to the Challenges and Opportunities of Next-Gen Clients
Deeper engagement can build an advantage with the next generation of investors.
Every generation demands something different of financial advisers. Next-gen investors are often defined by their relationship to technology, which provides both challenges and opportunities for advisers to meet clients where they are and to address unique needs technology can’t.
There’s no doubt younger investors’ attitudes toward investing are colored by technology. They’ve grown up with quick access to an abundance of information that artificial intelligence now makes easier to process and digest—meaning, they feel more comfortable finding and vetting financial information themselves than previous generations. They’re also comfortable interacting with low-cost trading platforms. As a result, younger investors often manage the transactional side of investing on their own and build investing confidence, experience, and knowledge through experiential learning like interactive portfolio stimulations.
Yet, a little knowledge can be dangerous; confirmation bias increases at the early stages of learning, as we draw assumptions based on incomplete information. Similarly, other cognitive biases like overconfidence and the availability heuristic can lead to a miscalibration of risk and return and unrealistic expectations. Further, investors may develop a warped view of their finances (money dysmorphia) from comparing their situations with what they see online.
As a result, the latest generation of investors may feel that they need less guidance with their finances than their parents did at the same stage of life, while at the same time requiring more guidance to meet their expectations of investing.
How Advisers Can Engage the Next Generation of Clients
1. Challenge: Younger investors want to be active in their financial journey and view consumption as an expression of individual identity. As a result, they expect advisers to work with them to tailor their financial plans.
Opportunity: Be a financial co-pilot. Invite your younger clients to participate in the planning process by helping them articulate their goals and expectations and working together to build their plan. This fulfills their need for ownership and individuality in their financial plan and positions the adviser as an invaluable collaborator.
2. Challenge: An on-demand culture means advisers are competing against short-form and often free sources of financial knowledge. The newest generation of investors may not readily see the benefit of a financial adviser’s advice when they are used to short, sharp, and affordable content they can access from their phones whenever they want.
Opportunity: Create bite-size services. Virtual and on-demand sessions and workshops can help expand your reach to younger audiences. You can also offer segmented services around goal discovery, cash flow management, portfolio building, and behavioural coaching. Though small, these offerings can sow the seeds with investors who are still building wealth and grow into a long-term relationship.
3. Challenge: Younger generations of investors may place a greater focus on purpose and mission when it comes to their financial decisions. This means they may be less inclined to engage with financial advisers who are unclear about how personal values fit into financial planning.
Opportunity: Engage a values-driven approach. Advisers can help younger clients uncover personal values and craft meaningful goals that align with those values. This valuable service fosters deeper connections and results in meaningful strategies that better align with client preferences. As an added benefit, talking about nonfinancial concerns is an experience clients often share with their social circle, providing a valuable opportunity for advisers to reach new audiences.
All three strategies can serve as a sticky entry into financial advising by filling the needs of next-gen investors that cannot be met with just Google and ChatGPT.
