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The next generation of investors is here. Bringing new thinking, expectations and standards, advisors must concurrently adapt and “re-wire” their own practices and processes in order to empower their investors, as highlighted in a recent Deloitte report. While this new generation largely comprises of Gen X and Y, it also includes baby boomers who have been influenced by younger investors, such as their children.   

Here are three approaches financial advisors can take to effectively reach a new generation of investors.

1. Offer Multiple Advisory Models

Investors today want to stay in control of their investments and financial lives. They welcome input and recommendations from an advisor, but desire to make key financial decisions themselves. They are also comfortable doing their own investment research; many do not prefer to use any sort of discretionary advisor model.

As such, it’s prudent for advisory firms to offer clients several advice models. Some clients may want the traditional discretionary model, yet others may be more comfortable with a retainer model — one that gives access to an advisor for input, which the client can then use to make their own financial decisions and implement on their own if they choose.

2. Offer a Compelling Digital Experience

A more compelling digital experience has become a standard expectation. The new investor is comfortable managing most aspects of their lives online, including banking, shopping, telemedicine and more. Meeting face-to-face with a financial advisor may be unnecessary, and this rings even more true in light of the pandemic and social distancing measures. 

With this backdrop, communicating with advisors on their own terms is paramount. Adopting digital solutions can help advisors reach this goal. Easy-to-use client portals have become a prerequisite — effectively helping to manage relationships by providing investors the ability to view their accounts, exchange secure emails and share documents. As the Deloitte report notes, investors increasingly view experience, rather than product offerings, as a differentiating factor. And the pandemic has facilitated accelerated adoption of digitization and personalization from investors, financial advisors and wealth firms, changing the client-advisor relationship.

3. Focus on Downside Protection and Hedging

Deloitte’s research has also shown that investors today are interested in managing downside risk and in using hedging strategies for their portfolios to manage this risk. They view risk as the risk of loss rather than just volatility that might be measured by the standard deviation of their portfolio or of a single holding. 

Many investors may recall the financial crisis of 2008 and the impact it might have had on their parents. They are also living through the market swings caused by the pandemic. While they understand the need for portfolio diversification based on using traditional asset classes, many are looking beyond that and want to include alternative investments and other hedging strategies to reduce the downside risk in their portfolios. It’s key to understand their 

The Bottom Line

Today’s investors have a different set of expectations than prior generations. They are often comfortable conducting their own research and making their own financial decisions. However, they still seek support from their advisor in order to do this.

Digitally savvy, they expect their advisors to be the same. They understand the need for portfolio diversification, but are focused on downside protection as well through alternative assets and hedging strategies. 

Cerulli Associates estimates that the next 25 years will see a wealth transfer to the next generation in the neighborhood of $68 trillion. Financial advisors who want to work with this new generation of investors need to adapt their practices to serve them on their terms. 


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