Solving the Young Investor Challenge

How tech is amplifying the role of the financial advisor

The rapid expansion of social media and artificial intelligence within the financial services space holds undeniable implications for the advisors/client dynamic – particularly when it comes to young investors. Is digitization on its way to making one-to-one planning and advice obsolete? In a word: No.

This was the topic of a recent episode of The Flexible Advisor, featuring Ryan George, Chief Marketing Officer of Docupace, a tech company specializing in automated workflow and document management solutions for financial services firms. Ryan shared insights from his firm’s research regarding the needs, approaches, and attitudes of younger investors in today’s environment.

Rethink “Young”

Many of us tend to categorize the Millennial generation as “young.” George explains why this is a mistake. “I fall into the millennial camp and I turned 40 last year. Many of us have professional degrees, professional careers, and we are accumulating assets. Millennials now account for about 13 million households, with almost $2 trillion assets. They are specifically looking for wealth management guidance. Some of the things happening in the economy are steering people towards more sound advice; they're looking for an expert. I think it's a beneficial for an advisor to step into that.”

“When it comes to a making key decisions people still look for human advice.”

– Ryan George

A primary aspect of doing that successfully, said George, is to recognize that the younger generation views money differently than their predecessors. This is detailed in his firm’s recent white paper — Five Ways to Capitalize on the Changing Attitudes of American Investors. 

• Wealth as a tool. “A lot of people are saving for their kids' college and for retirement. But they also want to enjoy some of their money now, in a way that doesn't disrupt their longer-term financial plan. I think this is a crucial place for an advisor to step in with guidance. One of the smartest things my financial advisor ever told my wife and me was ‘It's time for you to take a vacation,’ which we did. We had earned it. If we hadn't let ourselves enjoy a bit of that money in the present, we may have become less motivated to pursue our long-term strategy. For ‘younger’ investors, it's not just about reaching age 65.” 
• Risk aversion. As George explains, yonger clients matured under a very different set of circumstances. “Someone who is 25 years old, early in their financial life, has seen 9/11, followed relatively quickly by the Great Financial Crisis of 2008-2009, and then the COVID crisis. They have seen plenty of disruption, and as a result, I think there is an expectation of bumpiness in the markets that has made them risk averse. Having that risk conversation with an experienced financial advisor can really benefit them.”
• An expansive view of “investing.” Younger investors tend to be more open to different types of investments and structures such as ETFs, alternatives, or innovative insurance products. “I think advisors need to think holistically and not be tied to traditional investment products. From an advisory standpoint, technology can help provide access to those solutions and integrate them into the investment strategy.” 

Man Versus App 

Technology is changing the investment landscape, but to what extent? According to George, “The assumption is that older investors would rather stay away from digital tools and apps. But, at this point technology has been part of our lives for so long that most people are somewhat comfortable with it. Our research found 4 in 10 respondents saying they used technology to manage finances more during the pandemic than ever before. And that carries through to today. Nevertheless, when it comes to making key decisions people still look for human advice.” The point, he said, is finding the balance between what's good for advice versus what's good for basic access. “A mobile app provides access to your funds; you can monitor a portfolio and even do some trading, but you're not looking for the app to give you advice. This is where engagement with the financial advisor comes. The human supportive part, the element that can’t be replaced by technology, is when a client is looking to make a move or actually talk something out.” 

In other words, while there are plenty of financial planning tools out there for advisors and clients alike, there are circumstances that can only be satisfied through human interaction. George offered two examples: “When a client calls to say, ‘I'm nervous about what's going on in Washington,’ or ‘My wife is stricken with cancer, how does that impact us?’ technology is not equipped to offer an opinion or guidance. This is where a human can step in to listen, discuss, and support. What's interesting is that an advisor can use a tool like ChatGBT to test run various responses to different types of questions and consider potential responses. That might help to provide guidance and context, but it's the human that’s out front delivering that advice. I think that's key to remember. The two together offer the biggest uplift.”

3 Opportunities

George sees three key themes that can drive the acquisition and retention of next-generation clients:  

1. The ‘great wealth transfer’ is here. “I think it’s important to create an engagement model for your current and future client base to address wealth transfer. That's the place where the advisor can make a strong inroad with the next generation while generating revenue from current clients. 
2. Engage more women. “This is not just about hiring women advisors but serving women who are the breadwinners of their households. This is an area where I think the industry is still behind.  I would love to see us get in front of it.”
3. Engage younger clients through education. “I think this is where social media and other electronic tools come in,” said George. “Advisors can use these tools to generate educational content relevant to a younger group. This way, they can see you, follow you, and recognize you as an influential person with information they can use. When the time comes that they have an opportunity to invest, there is a better chance that they will come to you.

You can access the full discussion on The Flexible Advisor, wherever you get your podcasts.