This research reveals some clear indications for how advisers can best service the next generations. Investing behaviours, expectations of advice and financial needs are shifting from older generations. Next gens have a stronger appetite for financial advice and are likely to seek this at an earlier age.
This not only provides advisers with more time horizon to make a real difference, it also represents greater client tenure and customer lifetime value. Next gens also have some big decisions to make navigating intergenerational wealth transfer. Opportunities to win over these cohorts and build future client bases are strong if advisers can get their offer right.
Addressing key financial needs
The cost of living is hitting hard but younger generations are more inclined to want to earn their way around these challenges signalling strong wealth growth ambitions. However, they may have less spending discipline which requires deft handling by advisers.
While less so for Gen X, financial goals tend to be much more immediate reflecting the life stage priorities.
Tax minimisation, paying off debt, buying a home or property and other short to medium term priorities like starting a family as well as funding education, travel and lifestyle are key top of mind goals for the next generations.
Saving for retirement becomes increasingly important as a long-term goal. However, interestingly younger generations tend to characterise their longer-term goals as achieving financial independence rather than just preparing for retirement suggesting that advisers may need to reframe their offer messaging.
Asset preferences are also shifting with greater interest in both passive and active ETFs in addition to cryptocurrencies gaining favourability. The latter represents significant risks for next gen investors without sufficient diversification strategies in place. Could the next crypto crash see large swathes of inherited wealth disappear into thin air?
Alignment with personal values is also becoming increasingly important in investment decisions, including social and ethical investments, as well as sustainability and impact investing considerations. This brings stronger expectations for advisers to be knowledgeable in these spaces.
Coaching role for self-improvement
Gen Z and Gen Y report higher risk tolerances than Gen X. While this may be reflective of typical age-based risk tolerance adjustments it may also signal a trend where younger gens are becoming more adventurous with investing choices and possibly even more focused on ‘getting rich quick’.
They have greater investment confidence, and are still hungry to improve their financial knowledge, but the fact they have less experience suggests there may be youthful ‘overconfidence’ in the mix. Combined with a greater propensity for direct investing, this has implications for advisers who may be more accustomed to more conservative investing attitudes and desire for delegation among older generational clients. This may also suggest strategies possibly traditionally reserved for wealthier clients, such as partitioning a portion of assets for the client to ‘play’ with to feel they retain more control.
Younger generations want advisers to be able to explain complex financial concepts in simple terms, provide educational resources and accommodate their preference for a more hands on investing aspirations.
Seeking self-improvement amidst potential over confidence suggests a key role for advisers to educate next generation clients and influence them positively to make their best financial decisions. Next generation clients are less experienced and more impressionable, are becoming increasingly influenced by multiple information sources on social media and through finfluencers.
Advisers need to act as a reliable counterpoint to potentially poor-quality financial information or dubious finfluencer advice to help avoid poor financial outcomes.
Accommodating emerging experience expectations
Younger generations are much more likely to be accustomed to sophisticated digital service experiences and expect advisers to be able to provide these. These include seamless multi-channel experiences, interactive financial planning tools, investment monitoring, customer support, digital engagement platforms and best practice cyber security. However, the need for the human touch and customer centric servicing is still alive and well suggesting that advisers need to master both one to one and digital servicing offers.
Related to this is that flexibility and convenience become increasing important as Gens get younger. They also demand more personalised experiences including communications, engaging content, access to digital tools and alignment with their personal values.
Managing inheritance
A significant number of next-generation individuals have already received financial assistance or inheritance, with many others anticipating substantial windfalls in the near future. This presents new and important financial decisions, highlighting the need for professional guidance.
Many beneficiaries find themselves requiring assistance to manage the legal, financial, and investment challenges associated with inheritance. They need to solve for tax implications, potential family disputes, accommodate cultural needs, facilitate intergenerational communication and family governance to ensure smooth wealth transfer. They need to decide how to allocate the money effectively and navigate the potential pitfalls of dealing with lump sum big decisions.
There is a strong interest in seeking professional financial advice, especially when it comes highly recommended by family members.
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