Young adults (Photo: Thinkstock)

Distinct differences exist in the way millennial advisors and their older counterparts employ technology and the types of technology they favor, according to Nationwide Advisory Solutions’ fifth annual Advisor Authority study, released Monday.

Twenty-nine percent of millennial advisors said adding new technology was the most important thing they would do over the next 12 months to bolster their practice’s profitability, compared with 11% of baby boomer advisors who said this.

In addition, 20% of millennial advisors, but only 3% of boomers, said consolidating existing technology was most important to enhance profitability.

“As the first digital natives, millennials have spent their entire lives with instant online access to almost everything, giving them a distinct advantage when it comes to leveraging new technology to stay a step ahead,” Craig Hawley, head of Nationwide’s annuity distribution, said in a statement.

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Even so, the two groups can learn from each other, Hawley said.

“Just as boomers can take a page from millennials’ playbook, by adopting AI, robo and other technology, millennials can follow the lead of more experienced advisors, by not losing sight of the human connection, building strong one-on-one relationships and working with their clients’ family and children to build a more profitable practice.”

The Harris Poll conducted an online survey within the U.S. from Feb. 15 to March 4 among 1,021 financial advisors and 824 investors.

Asked which solutions they were most interested in integrating into their practice over the next 12 months, millennial advisors were much likelier than boomers to choose the following:

  • Mobile websites and/or mobile apps: 48% vs 23%
  • Tools for risk management, risk monitoring and portfolio stress testing: 46% vs 33%
  • Interactive websites and/or client portals: 40% vs 23%
  • Artificial Intelligence: 34% vs 17%
  • Robo advisors: 22% vs 11%

Next Generation Clientele

Millennials and boomers in the survey differed on the importance of using technology to enhance profitability, but both agreed that adding new clients was the number one way to do so.

For 36% of millennial advisors, the chief factor for enhancing profitability was adding new clients, followed by adding new technology, 29%, and targeting high-net-worth clients, 28%.

In contrast, 55% of boomers said the best route to profitability was adding new clients, 30% said it was adding a younger generation of clients and 28% said it was attracting and retaining clients’ heirs.

Eighty-five percent of millennial advisors reported that they had a strategy to retain clients’ heirs, compared with 64% of boomer advisors, and 71% of millennials said they had changed their marketing strategy to attract a next generation of investors, versus 38% of boomers. These younger advisors are also more likely to use technology to help drive client acquisition in their pursuit of greater profitability.

To attract the next generation of investors, millennial advisors were somewhat likelier than boomer advisors to increase their use of mobile technology, more than three times more likely to make enhancements to current websites and/or client portals, more than twice as likely to offer robust cyber security procedures and more than twice as likely to leverage robo-advisors or other digital portfolio allocation tools.

Millennials were also somewhat likelier than boomers to increase their use of social media to attract the next generation of investors.

Alternatively, to attract the next generation of investors, boomer advisors were far more likely than millennial ones to work more with a client’s family and children and to focus on their years of experience. They were also somewhat likelier to focus on personalized advice for a holistic financial picture.

The survey found that among factors that may lead to this digital divide on client acquisition was that millennials and boomers differed on which generation of investor would be their primary target in the next 12 months.

Fifty-one percent of millennial advisors said they were most likely to target fellow millennial investors, 26% said Gen-X investors, 10% Gen Z and 9% boomers. For their part, 47% of boomer advisors said they were likeliest to target fellow boomers, 33% Gen X, 12% millennials and a mere 1% Gen Z.

Gaining Client Insights

About a third each of millennial and boomer advisors agreed that the main way technology would help them better serve clients over the next 12 months was understanding clients’ current needs and behaviors.

However, 29% of millennials said technology helped them deliver better service by analyzing and understanding clients’ expectations, compared with 19% of boomers who said this. Likewise, 29% of millennials and 23% of boomers cited protecting clients’ assets against market risk, 26% vs 18% providing more personalized holistic planning and 24% vs 17% predicting the impact of investing decisions.

Twenty-one percent of millennials but only 9% of boomers said they used technology to engineer investing strategies for better returns. Alternatively, 38% of boomers vs 26% of millennials said the top way technology helped them provide better service was to free up time to focus on one-on-one relationships with clients.

Two generational differences were most prominent when millennials and boomers were asked which tech-enabled solutions would help them to better support clients’ needs over the next 12 months.

Millennial advisors were more than four times likelier than boomer advisors to use artificial intelligence and/or data analytics to understand client behavior. And while 12% of millennials said they used robo advisors to provide better service, only 1% of boomers did this.

Millennial and boomer advisors exhibited more similarities around other types of technology to better support clients’ needs.

They agreed that the number-one solution was financial planning software, were equally likely to use budgeting and cash management tools and were closely aligned around tools for risk management, risk monitoring and portfolio stress testing and tax optimization tools.

Millennials were somewhat likelier than boomers to support clients’ needs with mobile websites and/or mobile apps, cyber security and real-time data alerts, but were somewhat less likely than boomers to use retirement accumulation tools and retirement income distribution planning tools.

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