Members of Gen X and Y have less allegiance to their investment providers than previous generations, according to a new report from independent financial technology provider Scivantage and research and advisory firm Aite Group.

The study, The Race for Next-Generation Assets: Can Banks Maintain Their Lead?, tracked the investing preferences of younger generations and the impact they may have on long-term growth potential for wealth management firms.

"Gen-Xers and Gen-Yers have been far less loyal to their investment providers over the last few years compared to Boomer and Silent Generation investors, indicating that young consumers have yet to find their ideal investment providers," said Sophie Schmitt, Aite group senior analyst of wealth management, in a statement. "Banks seeking to maximize their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services."


With $40 trillion expected to transition to younger U.S. generations over the next several years, the report emphasized that demographic's need for convenient online tools.  

Other key findings of the report include:

.    40 percent of young investors still consider a bank to be their primary investment provider. Only 20 percent of young investors consider an online brokerage firm to be their primary investment provider despite their strong adoption of online trading

.    44 percent of Gen X and Gen Y investors shifted assets to another investment firm or switched investment providers due to availability of online tools

.    42 percent of Gen X and Gen Y respondents said their bank would need to offer more convenient services and/or more robust online brokerage/trading capabilities in order for them to move more assets to their bank

.    About 30 percent of young investors trade more than 25 times per year and slightly less than 70 percent trade online more than five times per year

.    The No. 1 reason clients shift investments to another firm is fees (those tied to accounts, financial advisory and asset management)

"Online investing capabilities are now second nature to Gen X and Gen Y investors and will be a requirement for banks that want to attract future high-net-worth or current affluent members of this segment," stated Chris Psaltos, Scivantage's vice president of product management. "As younger, tech-savvy investors look for greater control of the investment decision-making process, wealth management firms, particularly banks, must ensure that their online investment platforms are keeping pace with the latest consumer technology innovations."

The December 2011 survey polled more than 1,000 U.S. investors who hold a minimum of $25,000 in investable assets and have access to online trading capabilities.

Danielle Lee writes for Accounting Today.



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