With millennials and Gen X reportedly set to control $30 trillion of investable assets by 2020, this next generation client cohort has become increasingly important to advisors.
LinkedIn and Greenwich Associates conducted a study to identify how wealth managers can successfully engage high net worth millennials and Gen Xers.
As part of the study, they focused on data gathered from a subset of 202 respondents from across the United States. The study targeted millennials, Gen X, baby boomers and those 70 years and older. The study further broke down these generations into subgroups of high net worth individuals (HNWIs), defined as those with investable assets in excess of $1 million, excluding primary residence.
Technology innovation has increased as a factor taken into account by all investors, but especially among younger clients. The study finds that ability to communicate electronically, access to automated investing tools and real-time notifications of portfolio moving news have all become part of the conversation, with HNW individuals now more willing to do their own research and be generally more hands-on.
Here are four findings for wealth managers to consider when engaging HNW millennials and Gen Xers.
1. Next gen clients judge advisors’ “electronic footprint”
One-third of HNW millennials use the social media profiles of potential wealth advisors as part of their evaluation process, compared to only 10% of HNW individuals of all other age groups. Half of HNW millennials look at an advisor’s posts on social, compared to one-sixth of HNW individuals across other age cohorts.
The study finds these things are important to not just millennials, but also those with more money.
According to the study, social media and electronic information from financial news sites and FINRA’s BrokerCheck are very important among those with total investable assets over $10 million.
“Getting to know someone via their electronic footprint is, therefore, not just for the younger generation, but also for those with more money on the table,” the study stated.
2. Robo-advisors matter less than you think
“Contrary to its ongoing growth story, access to robo-advisors was viewed as the least important factor for HNW [individuals] assessing/choosing their wealth manager,” the study said.
Only 3% of the respondents noted robo-advisors as part of their decision-making process.
Additionally, of those who were interested in robo-advisors, most were in the highest investable assets bucket. LinkedIn’s analysis found that it is becoming more common for those with more than $10 million in investable assets to automate the foundation of their invested dollars where typical asset allocation strategies are used, and look for a human touch for their more complex investing needs.
3. But technology is still important; increasingly so among millennials
The study finds HNW millennials are engaging with their advisors differently than generations before them. For example, only 40% of the HNW millennials in the study met with their new advisor in person to make an investment plan. Instead, more than one-third took a more self-directed approach.
The study finds millennials were twice as likely as other age groups to utilize content on their wealth manager’s website to research investment options. Of the participants overall, 14% took a self-directed approach. Gen Xers were found to be the most heavily reliant on face-to-face meetings, with only 2% taking a self-directed approach.
However, the research finds that technology does become increasingly important across all ages as the customer relationship progresses. Whereas only 7% found technology important in the informative phase, 17% found technology extremely important while making transactions later on.
“It is at this transaction stage that robo-advisors may enter the picture in the future,” the study stated.
4. Communication technology is more important to HNWs than automated advice
Communication technology during the informative early stage of a client relationship is more important to the wealthiest HNW individuals than access to automated investing tools, LinkedIn found.
“Utilizing communication and information sharing tools to both foster in-person conversations and encourage information sharing within a given community are playing an equally large role in changing the advisor-advisee relationship,” the study reported.
Whereas robo-advising is focused on the transactional portion of the customer relationship, communication-related technologies are also used during the informative early stage for ongoing dialogue between the wealth manager and client.
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