Imagine if Netflix distributed “Star Wars: The Last Jedi” exclusively in VHS format. Or if Amazon decided to sell only mystery novels, telling patrons who want a copy of “The Handmaid’s Tale” to look elsewhere.
Ludicrous, to be sure. But for millennials (who now officially outnumber baby boomers) and Generation Z, the practices of some financial advisors may seem almost as archaic.
For example, some advisors provide their most valuable resource — their advice and counsel — in a hard-copy format that seems as relevant as video cassettes to many investors, especially those born in or after the late ‘80s. Plus, advisors regularly ask clients to use outside resources to purchase products, such as annuities, because they don’t offer truly unified, data-driven services that cover all elements of finance: planning and budgeting, investing, managing credit and protecting assets.
For generations that grew up with Amazon, the self-imposed restrictions by some financial advisors in serving their clients seem like a curiosity from an older time.
At first glance, advisors face an insurmountable challenge. Their businesses overlap multiple generations ranging from Gen Z to the boomers, each with distinct needs and preferences. And that’s led to an either-or choice. Either maintain an approach that only fits certain clientele well or develop an array of customized options. Fortunately, however, technology now provides the ability to communicate across and within generations.
Here are four ways advisors can design a multigenerational strategy, capture interest on both sides of the gap and, ultimately, drive revenue for their firms:
1. Gain a Holistic View of Your Clients’ Finances
Raised on free money-management apps such as Mint and Personal Capital, many investors love the convenience of using Yodlee-aggregated data that enables advisors to provide a holistic view of their finances. Data aggregation also benefits clients through more personalized advice, enabling advisors to develop actionable insights and build robust relationships with clients to understand and positively impact their goals and financial needs.
The success of this approach is indicated by an Aite study, “Technology Integration Turbocharges Advisor Productivity: Making Time for Clients,” that revealed that RIAs who utilize data aggregation have 78% larger books of business than those who don’t use aggregation; similarly, independent broker-dealers who used data aggregation had 100% larger books of business. In the same vein, RIAs and IBDs using data aggregation had 46% and 73% higher revenues, respectively.
The strength of these numbers indicates the appeal of data-powered service to multiple generations of investors. Investors inevitably benefit from advisors having a seamless and holistic view of accounts and activity to provide more detailed, specific advice based on benchmark data, peer-level performance indicators and other markers.
2. Deliver Unified Advice, Beyond Investing
In a world where consumers expect to find everything in one place, like Amazon, it simply makes sense that financial advisors offer the full spectrum of unified advice solutions, with technology powered by open APIs. This calls for a complete retreat from the old advisor model of quarterly performance reports delivered via snail mail, and a full embrace of holistic financial planning, which is critical for younger investors. This means working with your clients to define their goals, needs and challenges early on.
The growing popularity of this approach was reinforced by a recent survey by Spectrem, Defining Wealth Management, which highlighted differences in expectations of advisor services and services actually being delivered. While findings showed that expectations around financial planning and investment management were largely met, 83% of clients expected to receive advice regarding loan and credit management while only 3% of clients actually do. Similarly, 82% of clients expected to receive life insurance advice while only 12% do. The market demand for holistic advice is clearly relating to all areas of financial needs, not just planning and investing.