6 financial planning trends for advisors targeting young investors

December 6, 2022 1:36 PM

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The rise of social media "finfluencers" offering financial information, the need to find the right balance between digital technology and in-person advice and the tendency of millennials and Gen-Z investors to manage their own money are among the latest developments that are impacting how advisors approach the challenge of attracting young investors.

Read our roundup for more on these and other stories that advisors should be watching.

Making a strategic investment in the future

Young professionals starting careers typically don't have much capital to invest, but rather than ignore them, advisors should be taking them on as clients due to their potential as high-earning investors, according to Ken Van Leeuwen, founder of Van Leeuwen & Co.

"Wealth management firms often talk of hiring next-gen advisors to ensure that a mechanism is in place to care for client families over the long term," Van Leeuwen said. "Hand-in-hand with that should be an investment in next-gen clients who represent the high and ultrahigh net worth families of the future."

Connecting with young professionals at an early age is an investment in the future that can pay dividends in a client relationship that may go from navigating student loan debt and buying a home to saving for their children's education and investing for their long-term goals.

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Social media “finfluencer” with sound financial advice, or snake oil salesman?

Snake oil salesmanship has entered the social media age with the emergence of "finfluencers" offering financial guidance to young investors, who may not be able to distinguish between misinformation and good advice.

"We're living in an age of very talented emotional galvanizers that have the ability and the medium to tell very attractive stories and can use language that you would never dare [use] to evoke emotion in clients," said Andre Jean-Pierre, an RIA and managing director of Aces Advisors.

The risks of following the advice of social media finfluencers who are not regulated in the way qualified advisors are has prompted the NASAA to issue a warning about "such breezy and hyper-emotional endorsements being made in what is otherwise a very regulated industry."

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Finding the right blend of technology and human touch

In the next couple of decades, millennials and Gen-Z individuals stand to inherit trillions of dollars, but as digital natives accustomed to receiving information online, will they turn to an in-person professional for financial planning advice?

Michelle Tran, head of enterprise sales and senior vice president at Vestwell, believes they will. "They don't really know that they need financial advisors until they actually do," Tran said. "So how do you capture them at the moment when they do?"

As the industry grapples with the answer to that question, it's clear that social media — "table stakes at this point" according to Tran — and personalized technology will play an important part.

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New advisory service targets first-time investors

Young investors looking to take their first steps in the world of financial planning can now sign up for a new investment advisory service recently launched by Regions Financial targeted at "first-time, startup-type investors".

For as little as $5,000, young customers can open an InvestPath account, which offers them a choice of five portfolio strategies based on their risk tolerance and timespan, with access to both digital services and in-person support.

Like many other large and midsize banks, Regions has developed the new advisory service in response to increasing competition from fintechs offering digital investing services specifically for younger investors.

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Going it alone with DIY wealth management

It's no surprise that millennial and Gen-Z individuals who have grown up in a digital world turn to online sources for market news and investment advice rather than an advisor. That DIY approach to managing their money is a worrying trend for the wealth management industry.

Seasoned professionals advise caution: "Many people who have been successful in their own profession or career believe that their intelligence and expertise in one field gives them the knowledge and wisdom they need to do their own financial planning," said Lori Sackler of Morgan Stanley Wealth Management, who believes such confidence is a mistake.

However, as these younger generations grow older and their financial situations become more complex — as buying a home, paying for college and other monetary challenges enter the equation — the appeal and benefits of using an advisor for financial planning may well come into its own.

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The logical way to communicate with clients

A millennial without a smartphone is virtually unheard of, so it's only logical for advisors looking to court young professionals to communicate with them via a medium that suits them — the text message.

Research shows that text message read rates are significantly higher than emails, with 98% of texts being read — 82% within the first five minutes — compared to only 25% of emails.

"If you've been living in the flip-phone world, it's time to update your view on texting and see it for what it is: the best marketing and client relationship management tool in your arsenal," said Greg Drozdow, head of Snappy Kraken's text messaging program for advisors.

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