For decades financial advisors and brokers have geared their working strategies towards older, and more seasoned investors, often leaving out, or simply ignoring the next generation of investors.
However, as younger generations - Millennials and Generation Z - begin to take more interest in investing compared to their older peers, advisors, and brokers will need to shift their attention to how they can cater to new generations of investors.
Unlike their older constituents, both Millennials and Gen Zs have different financial habits, goals, and preferences when it comes to investing.
For starters, a survey by CNBC and Momentive found that 35% of 18-to-34-year-olds make use of social media to look into new investment opportunities. A further 25% said that conversations with their family and friends also help them with their investment choices.
Elsewhere, 24% said that they visit financial websites, and a mere 7% claimed that they gather insight directly from a financial advisor or broker.
A closer examination of detailed age data by the U.S. Census Bureau shows that more than half of the total U.S. population are now members of the Millennial generation or younger. Older groups such as Baby Boomers and Gen X continue to make up a large portion of the American population, however, their affluence is waning as younger generations become the bigger spenders and earners among their generational peers.
This creates a big opportunity for advisors, leaving them with a chance to empower younger crowds of investors, and also help put them on track to become more financially secure.
Inspiring younger generations to invest more
Investing remains an intimidating experience for many people, as 22% of older Millennials - ages 33-41 - have said that they are intimidated by the stock market, and how it can often feel rigged against individual investors.
However, investing still presents multiple opportunities for individuals to grow their investment portfolio and further increase their earnings over the long term. Yet, for advisors, it’s becoming increasingly clear that younger generations have different goals for their money.
Some may be saving their investment to buy a house, while others are looking to pay off student loans or pay off car loans before they have to retire. Many are saving for retirement, while others are seemingly investing to build something they can live off as the cost of living dives deeper into their disposable income.
Whatever a person’s investing goal might be, it’s time for advisors to begin inspiring the next generation by playing an active role in their investment journey.
Get onto their level of understanding
A barrier that often exists between advisors and younger generations is the idea that they have the same level of understanding as their older peers when it comes to investing.
Yes, we can say that with all the available tech and tools younger generations should be dominating the market, however, investing hasn’t changed much over the last several years, and for novice investors, this can seem intimidating.
Advisors need to meet these investors at their level of understanding. Some investors might be leaving high school in the next few months, others may be starting their professional careers, and some may already have kids and are looking to build a retirement fund.
These generations are more diverse than ever before, with many of them coming from various social and financial backgrounds. Applying the template or blueprint which you’ve used for years might be more difficult than you’d expect.
Younger investors are more agile and often less prone to expose themselves to riskier and more volatile investment vehicles. Meeting them at their level, with either introductory plans, talks, or even showing them how different investments work can help them better understand where they can invest their money.
Creating a platform through which newer and less experienced investors can share thoughts and ideas on investing will help encourage them to be more open to different investment opportunities and how they can leverage these to their best ability.
Become more digitally savvy
Younger generations are more tech-savvy and digitally native. A majority of younger generations don’t know a world without the internet, while others have always known a world with computers, smartphones, tablets, and other tech devices.
Being an advisor for younger generations means that one will need to change the way you reach out to the market. Younger investors, as we’ve seen, find a majority of their information on social media platforms, financial websites, or even news sites.
Reaching these audiences requires advisors to become more digitally equipped, sharing the right message with the right audience. Whether it’s financial and investing advice, or sharing insight into how economic events will influence their investments in the short term, younger generations are more online and digitally engaged than their older constituents.
While it’s important to have an online presence, whether on social media or through a website, advisors and brokers need to be clear about their goals, and what they are looking to share with younger investors.
Addressing several issues all at once can be overwhelming, so instead focus on common areas which you’ve noticed have gained a lot of attention from younger investors - budgeting, personal finance, financial literacy - and provide authoritative, yet insightful information to online audiences.
Being more digitally visible encourages young people to take more interest in the information you might share, or the things you might talk about. Be sure to share insightful, yet meaningful content that captivates audiences, and keeps them engaged.
Create more personalized experiences
Personalization is key to investing. Young people consider personal experiences, even in wealth management, as a crucial component.
One research study found that more than 65% of Millennials were willing to pay more for personalized investing products and services. The same study found that 47% of those aged 35 years and younger mentioned that technology will make financial advisors more important in the coming years.
Taking this into consideration, we begin to understand how important both technology and personalization can be for young people, but how do advisors make the investment experience more personal for their cohort of novice investors?
One strategy could be to tell a story. Informing people of where and how you started as an investor and later an advisor can help encourage them that investing is a long process, and often consists of both losses and gains.
Another way to be more personal is to share the experience of other investors that have started at the same place where they may currently be, and how they’ve built their portfolio over the years.
Personalization can be an encouraging factor if you’re an advisor looking to help influence and inspire young people to be more active investors. Providing them with more tailored experiences, whether it’s through the investment options they can choose from, or showcasing how a specific investment vehicle might work in favor of their goals could be an encouraging strategy.
Don’t just tell them, show them
There are hundreds, if not thousands of investment-related articles available on the internet that any Millennial or Gen Z can access through their mobile device. While they need to stay informed and up-to-date about their investments and financial markets, it’s often more effective to show them how different changes in the market will influence their goals.
Start with a simple concept such as the power of compounding. While some people may know what it is and have read about it before, using visual cues could be more impactful and meaningful for young investors.
Highlighting how keeping money in a savings account will accumulate smaller returns, than investing it into ETFs per se, will help them realize the value of putting their money to work and further diversifying their portfolios.
Another way could be to explain to them how reinvesting their returns could present them with better outcomes in the long run, instead of using their profits. Maybe giving a deep dive into what the difference is between equity shares and preference shares will also help them stay more informed throughout their investment journey.
Young people have been told all their lives to save and prepare for retirement, yet no one has ever shown them how to do it. Being more visually active, whether it’s online or in person helps people better understand how their money is being put to work, and what the benefits can be of investing sooner, rather than waiting.
The takeaway
There continue to be ongoing changes in how younger investors perceive the stock and investment market. For many of them, the thought of putting money into something they know nothing about can be overwhelming and intimidating at times.
As financial advisors, playing a more active part in educating and informing young people how investments work, and how it will benefit them in the long run will give them a better understanding of how they can let their money work for them.
Yes, it’s important not to forget about older seasoned investors that are coming onto the market, however, the next generation of investors is already taking a more prominent seat at the table, and it’s time that advisors step up to the plate and help instruct them towards the right direction.
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