In this article, we share best practices for delivering an investing experience that
meets the evolving expectations of the next generation of investors.
This article was written in collaboration with our partner, Seeds. Seeds allows advisors to better assess investors, personalize portfolios, and present engaging insights–all in one digital solution
NEXT GEN INVESTORS • INVESTMENTS • VALUES ALIGNED INVESTING
Delivering a meaningful, engaging experience is essential for financial advisors looking to grow their business – especially when plans for growth include serving the next generation of investors.
According to research from Fidelity’s 2022 Investor Insights Study, just one in five advisors has an asset-weighted client under age 60. The average firm derives an overwhelming majority of its revenue from older clients, yet it largely ignores the upcoming generation.
As of now, advisors have contacted only 13% of their clients’ children, indicating a missed opportunity to engage the next generation.
Furthermore, 63% of young investors agree that advisors should play an important role in providing access to sophisticated investment strategies like alternatives. However, over half of young investors believe aligning investments to their values is more important than getting maximum returns.
Navigating the evolving expectations of investors isn’t easy.
In the face of diverse investor expectations and priorities, advisors must adopt a flexible engagement strategy. The ideal proposal should not only showcase financial acumen but also reflect tailored investment solutions.
This approach ensures alignment with the specific interests and values of each client.
So, how can we achieve this? Here are three steps to empower you to engage the next generation of investors.
Come to the introductory meeting prepared with questions to uncover everything needed to produce a thoughtful and meaningful portfolio proposal and ongoing experience for the client.
You should leave the meeting with an understanding of the following:
● Their financial goals and risk target: What are their aspirations and needs? What is their risk tolerance and time horizon?
● Their mindset: Do they focus on details or think about the big picture? Do they seek investments with a broader impact? Are they open to innovative approaches in their portfolio? What type of portfolio storytelling might resonate with them?
● Their interests and values: What stirs their passion? How are they already contributing their time and money to causes they believe in?
Demonstrate understanding of the investor with a meaningful proposal
Effectively respond to your investor by proposing relevant and meaningful portfolio recommendations. Doing so requires a wide variety of investment solutions at your disposal.
● Alternative investments: Incorporating alternative investments in your proposal can add value for both values-driven and return-focused investors. For investors focused on impact, these investments are more than just financial instruments; they’re a means to drive change, allowing them to directly influence causes they care about. Advisors can offer meaningful differentiation and foster deeper client engagement for those wishing to merge philanthropic passions with financial objectives.
Meanwhile, for the return-focused investor, alternative investments have the potential to mitigate portfolio volatility, amplify returns, and provide additional diversification, ensuring a more balanced and resilient financial portfolio. To learn more about how you can get access to exclusive private market impact investments to include in your portfolio recommendations, visit our solutions page.
● Incorporating values and interests into traditional investments: Investors may have strong feelings about what companies to add to their portfolios when it comes to traditional asset classes like stocks and bonds. Understanding preferences around corporate behaviors and products will allow advisors to curate the portfolio and align client preferences with financial goals. For example, some clients will prefer to avoid investments engaging in controversial businesses like private prisons, predatory lenders, oil & gas, or big tobacco– while maintaining strong diversification across market capitalization and sectors of the economy. Others will want to avoid companies creating or assuming environmental, people, or corporate integrity risks. To learn more about how you can incorporate values into traditional investments, visit Seeds solutions page.
Beyond specific value preferences, clients may express interest in emerging or thematic investment trends, such as AI, crypto, or electric vehicles. By identifying and leveraging these interests, advisors can highlight portfolio companies that are actively engaged in those areas of the market.
Customize your ongoing investing experience to meet their needs and expectations
It’s tempting to think that if the process isn’t broken, there is no need to change, but that simply isn’t true. An alarming number of clients report infrequent communication from their advisors, and 75% of all clients surveyed indicated that they want advisors to send personalized or relevant updates.
Tolerance for innovation: For some, developments like AI and autonomous vehicles are very exciting. For others, these topics may invoke discomfort or at least disinterest. Once your clients have completed their assessments, make an effort to talk about innovation regularly for the group who cares. Typically this is the next generation of investors, those in the Millennial and Gen Z age groups. Source
Traditional performance reporting won’t cut it: Returns are important, but there should be storytelling around the portfolio, as well. A straightforward way to do this is by sharing stories about the companies they own or new updates in their industries of interest. Tell them explicitly why you thought sharing these stories, collateral, or information with them would be relevant. Remind them that you are aware of how they want their money to impact themselves and the world.
Alternative investment reporting that engages the client: Clients don’t want to see another line item on their performance report; they want to feel connected to their investments. By honing in on what your client cares about most, you become the conduit through which their investment reports come to life. Whether that be detailed overviews of a project, pictures that bring an investment into focus, or donut charts that display how the portfolio is aligned with their goals and themes, it’s all about personalization. This approach not only sustains their engagement but also establishes a feedback loop. Clients become eager for these tailored updates, turning them into valuable discussion points for conversations with friends and colleagues, paving the way for future referrals.
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