Gen Zers love investing. But they don't love financial planners.
Rather than going to advisors or brokers for recommendations, members of Generation Z — often defined as people born between 1997 and 2012 — are far more likely to look for investing tips from social media, other websites and their friends and family. Those are some of the key findings offered in a report released Wednesday by the FINRA Investor Education Foundation, an affiliate of the broker-dealer industry's self-regulatory watchdog, and the CFA Institute, which administers the certified financial analyst designation.
Their
Half of the Gen Z investor survey respondents said they were driven to invest out of a fear of missing out, or FOMO. And 44% said their cohort faces greater financial difficulties than older ones.
Jack Heintzelman, a certified financial planner at Boston Wealth Strategies in Needham, Massachusetts, said advisors are partly to blame for young investors' infrequent reliance on advice from professionals. Heintzelman said it's well known that the first instinct of Gen Zers and millennials when they're seeking information on a new topic is to look to the internet.
But there are too few financial planners on forums like Twitter, Reddit and TikTok offering sound advice.
"We are not reaching out enough to get this information out in a way that these individuals would want to read it," Heintzelman said. "And they see things that they take as being advice from real financial advisors, and they assume that these people have financial expertise."
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Heintzelman, who at age 26 is on the border between the Gen Z and millennial generations, said that many younger clients don't want to use the same wealth managers their parents go to for advice. A lot of that reluctance, he said, comes from their expectation that those typically older professionals be just as comfortable and familiar with technology as they are.
"I've learned that if I can talk with them and show that I understand their thoughts and appreciate where they're coming from, then they are really willing to take financial advice," Heintzelman said.
Technology plays a big role not only in how young investors learn about investing but also in how they invest. Of the Gen Z respondents to the survey, 65% said they use investing apps; some 55% of millennials reported doing the same. Among Gen Xers, though, only 38% said they use apps.
They and millennials were far more likely to reach out to financial professionals — about 35% of the respondents in each group said they would do so. By contrast, only 22% of Gen Z investors said the same.
The bad and the good
The FINRA Foundation and CFA Institute's report wasn't all bad news for financial planners. It found that 24% of respondents listed advisors as one of their top three most trusted sources of investment information. That result was exceeded only by the 27% of Gen Z respondents who listed parents and family as their most trusted sources.
FINRA Foundation President Gerri Walsh noted that even though Gen Zers often look to social media for information, that doesn't mean they trust what they find there.
"In fact, they are twice as likely to say that financial professionals are the most trustworthy source of information on financial topics compared to social media," Walsh said in an email. "When it comes to trust and financial information, Gen Z investors place financial professionals second only to parents and family members, and a close second at that."
Nearly seven in 10, or 69%, of the Gen Z investors said they were most likely to trust advice from people who could "explain things clearly." Next in the ranking, 53% said they put faith in information that is "relevant to me." More than half, or 52%, said they trust advisors who share details of their own financial performance.
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The report found that Gen Z investors were more likely to be male, slightly wealthier than non-investors and hold a college degree. There were almost no noticeable differences among racial and ethnic groups.
Some 62% of Gen Zers said their primary investment goal was to have money for travel and vacations. About 55% put a priority on saving for expenses and 51% said they want to be able to live comfortably in retirement.
Among Gen Z investors, 68% listed the cost of living and inflation as their main barrier to reaching their financial goals, 43% listed the economy and market conditions and 38% listed their employment situation and income.
Gen Z non-investors said they don't invest because of their lack of savings (65%), they're living from paycheck to paycheck (64%) and because they don't know enough to feel confident (56%).
"If we want to lower the barriers to participation in the markets, one important way to do so will be to address this education need," Walsh said.
The report also looked at Gen Z investors in other countries. It found, for instance, that Chinese Gen Zers tend to prefer mutual funds (54%) whereas Canadian Gen Zers were far more attracted to crypto (57%) Among Gen Z investors in the U.K., half of the respondents said they own cryptocurrencies and just over one in four said they have individual stocks.
