The current economic environment is certainly challenging and for many, downright confusing. While some experts argue that the economy will avoid a downturn, others, including 95% of community bankers, believe the U.S. economy is already in a recession. With an economy we can’t quite seem to predict, younger generations are in particular need of more professional help to build a financially healthy future.
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According to our recent survey conducted with The Harris Poll, 82% of Gen Z and 84% of Millennials say there are financial topics they need financial advice on. Yet, despite this need, the majority have not sought it. They are either not sure where to find the right financial advisor or don’t think they have enough money to hire one. Instead, younger consumers are turning to apps like Acorns and Robinhood or to social media platforms, like TikTok, YouTube, or Instagram, for financial guidance. The latter is an especially concerning trend as many influencers lack the necessary credentials and expertise to provide sound financial advice.
The survey also found that 40% of Gen Z have no money saved for retirement!
Although people often start saving as they get older, having sound financial advice at an early age can make a big difference. These figures highlight the disconnect between needing and obtaining professional financial advice among the younger generations and the urgent need for action.
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The challenge is that most financial advisors are already stretched thin with the resources currently available to them, struggling to meet their current clients’ expectations and needs. The role of the advisor is constantly expanding, with clients increasingly expecting a wider set of skills and advice on life events and situations that fall outside of the traditional financial advisory relationship. As advisors are trying to keep their heads above water, growing their customer base with customers at the beginning of their financial journeys might fall to the bottom of the priority list when compared to focusing on more established, higher-revenue clients. But spending time now with the next generation of clients will ensure they remain loyal for decades to come, adding to the firm’s revenue as these groups acquire and inherit wealth.
Modern technology can help advisors manage more clients and do it faster. Open, cloud-based technologies that leverage APIs and enable seamless integrations to third parties of choice can digitize and automate tasks, enhancing internal efficiencies, reducing costs, and freeing up time for advisors to deepen current relationships and build new ones. An end-to-end financial advisory platform, that spans the comprehensive advisory lifecycle, will provide a centralized ecosystem for both advisors and clients.
To serve the younger generation, advisors’ philosophy should also change.
Most Gen Z and Millennial clients will likely not need a high-touch approach. Instead, a hybrid advice model, which combines the convenience of digital capabilities with the personal touch of a financial advisor is a better fit. This model can help automate surface-level interactions, while saving advisors’ time for more sophisticated conversations and needs such as identifying long-term financial goals or saving for retirement. Self-service tools and client portals also allow for a more collaborative experience, making young investors feel like they are in the driver’s seat of their financial decisions.
In the current environment, most Americans have heightened concern about their financial wellness, but no one is more vulnerable than the younger generations.
Millennials and Gen Z need wide, easy access to professional advice via digitally optimized tools that keep them engaged and on track. They also want to communicate with advisors when and how they prefer. Advisors should update both their technology stacks and adjust their philosophy to meet the needs of clients at every stage and sophistication level and bridge the advice gap. Those who don’t risk losing these profitable segments to alternative providers and disruptors.