Despite personal finance being an essential part of daily life, financial literacy is dangerously under-taught.

In the 2016 National Financial Capability Study, FINRA found that slightly less than a third of respondents (31%) report having been offered financial education at a school, college, or workplace, and only 21% say they participated. Even for the most educated, financial risk is very real and mistakes happen every day. It is our responsibility, as professionals in the financial advisory industry, to help close this gap and promote broader and deeper financial knowledge.

The first step in accomplishing this goal is closing the gap between actual and perceived financial knowledge. FINRA's recent study also found that Americans' perception of their financial knowledge is high, while their ability to answer basic financial literacy questions is trending downward. Three fourths (76%) of respondents scored themselves between five and seven on a seven-point scale measuring perceived financial knowledge; in reality, only 14% of respondents correctly answered all five out of five evaluative questions.

A study from Jump$tart and Capital One showed that 79% of American parents see themselves as positive financial role models - yet 42% have not even discussed basic money skills with their children. Parents can't teach what they don’t know.

YOUNGEST AT RISK
The safety net is shrinking, and all investors' concerns are growing. Gone are the days of pensions and fully-funded employer-paid health insurance. Even the long-term viability of Social Security is in question. As longevity is increasing, so are the financial challenges and financial risks in later life.

Younger generations stand to lose the most if they are financially illiterate. Many millennials and even some Gen Xers face more complex financial choices and more obstacles to achieving financial independence than their parents, as the cost of education is rising while wages are stagnant. Right now, only half of adults ages 30 and up are saving at least 5 percent of their income, and the typical recent college graduate is saddled with an average $37,172 in student loan debt, up six percent from last year.

This does not mix well with the tough post-crash economy and ensuing years of volatile markets, which have pushed many consumers, especially the youngest, to distrust financial institutions. As this massive trust deficit between consumers and our industry continues to expand, while access to the Internet and inexpensive digital solutions like robo advisers continue to rise, many young investors choose to self-educate.

But access to more information is not the same as understanding information and knowing how to apply it. Access to more online tools is not the same as having the right online tools and knowing how to use them. It is so important, in this moment, for our industry to confront this trust deficit and narrow this knowledge gap. And the best way we can improve the standard of financial literacy for our next-generation investors is not just by developing better educational tools-but also by integrating these tools with the power of guided advice.

IMPORTANCE OF MOBILE
Technology - especially mobile technology - holds the greatest promise for engaging young adults. Younger generations are true digital natives and mobile devices are their way of life. The exponential growth of mobile devices among younger generations is transforming the way they access information - including financial information. Focusing on how they use smartphones and tablets could provide a way for educators, policymakers and financial advisers to narrow the financial literacy gap.

According to a study from comScore more than 85% of millennials have smart phones, and one in five rely exclusively on mobile devices for Internet access. Another recent survey shows that millennials are six times more likely than Boomers to consume all of their digital media entirely on mobile devices. Likewise, teens aged 13 to 17 are also going mobile. According to a study from Pew Research, nearly three-fourth of U.S. teens have access to smart phones. Ninety-four percent of them go online daily using mobile devices. And a full 24 percent go online from mobile devices "almost constantly."

Digital devices are also changing the way younger generations approach financial transactions. A recent study from FICO shows that the demographic group using mobile banking applications the most are millennials at 70%, compared to 54% of Gen-X, and just 36% of Boomers. And according to a study from Accenture, millennials have a clear affinity for digital payments. Year over year, "they continue to be change drivers and first movers in all digital payments areas when compared to other demographic groups."

EDUCATION THROUGH GAMIFICATION
Gamification is another powerful tool to engage younger generations in the fundamentals of financial literacy-and potentially reshape their real world financial behavior. Many studies show that gamification is a powerful vehicle for motivating performance, productivity and comprehension. An effective gamification strategy provides high levels of engagement and instant feedback, increasing recall and retention, and ultimately prompting behavioral change. According to industry experts, gamification techniques can increase the ability to learn by as much as 40 percent.

Through gamification, educational tools can offer an interactive and engaging way to learn about the benefits of planning, saving and investing. They can break down big financial goals into a smaller series of challenges and missions that motivate players to learn more and achieve more. There can be a social component that encourages collaboration, competition and greater awareness through channels like Twitter and Facebook.

The potential impact is huge. There are more than 155 million Americans - 48% of the entire U.S. population - who play video games, according to The Entertainment Software Association's "2015 Essential Facts About the Computer and Video Game Industry." According to this study, 56% of gamers are under the age of 35 - and the majority of this group are millennials.

GUIDED ADVICE'S POWER
But younger investors should not be defined by their digital habits alone. Success in providing effective financial literacy will need to go far beyond using new technology. It will encompass a better understanding of young investors - their financial challenges, their needs, their unique mindset. While they embrace innovation, younger generations also value collaboration, trusted relationships and one-on-one engagement.

Research shows that the youngest investors are very likely to work with financial advisors when compared to other generations. According to Jefferson National's 2016 Advisor Authority Study, 52% of millennials work with an adviser, compared to 42% of Gen Xers and 53% of Boomers. And although half (51%) of millennials prefer a low-touch experience combined with guided advice, as opposed to a high-touch engagement, they also say that face-to-face meetings are their preferred form of communication with their adviser.

Highlighting the importance of trust, Millennials say customized holistic planning and a fiduciary standard are among the top three most important factors influencing their choice of an adviser. Combined, these facts suggest that the future of financial literacy will arise at the intersection of technology and guided advice. Enter RIAs and fee-based advisers.

NEXT GEN ED
Consumers need the right education to improve their financial habits and start effectively preparing for the future. What does this mean for your firm and your clients? While our industry works to develop the next generation of financial literacy tools based on mobile technologies, gamification and other unique innovations, you still can introduce interactive technologies into your practice today to promote financial literacy for a younger generation of investors. These include online budgeting tools like Mint, online investing education programs like LearnVest and even robo advisers like Betterment. Integrating these tools with your guided advice ensures that your clients will leverage them to their full effectiveness.

Likewise, integrating technology and guided advice to provide a strong foundation in financial literacy is an effective way to work more closely with your clients and their children, to ensure strong relationships across the entire family, including the youngest members. By establishing yourself as a trusted educator, you can distinguish your firm from other advisers, to build and retain more business over time. And meeting the unique financial needs of younger investors is a massive opportunity for tech-savvy RIAs and fee-based advisers. Nearly $30 trillion in wealth will transfer from Boomers to their heirs over the next three to four decades - and there has never been a more important time to engage the next generation.

As young investors seek more knowledge, technology has the ability to enhance their financial education. It's our responsibility across the industry to lead the way. But nothing can replace the value of holistic planning and unbiased guided advice. By integrating technology and guided advice, we can empower the next generation of investors with greater financial literacy in the digital age, to ensure they can make the most informed decisions, build more wealth and achieve a secure financial future.