Three ways advisors can win over a new generation of investors

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We are in the midst of a potentially historic downturn for financial markets – and the millions of investors who entered them for the first time on a high are now experiencing feelings of disillusion, exhaustion and fear.

As a result, financial advisors have a unique opportunity to connect with these young investors and help them navigate such unfamiliar conditions – potentially winning over a new generation of clients in the process by demonstrating the value of full-service wealth management.

Younger millennials and other investors who got their start over the past dozen years have never experienced a bear market. These investors came of age in a “Goldilocks” era when a combination of historically low interest rates and gradual but steady economic growth in Canada and other developed countries fuelled a steady climb in asset values.

In such favourable conditions, young investors – who now make up about half of the mass market investing segment – found it possible to generate big investment returns on their own, using self-directed brokerage accounts, commission-free trading platforms, robo-advisors and other digital tools.

Now, the days of relatively easy returns have come to a dramatic and painful end. Investors who previously saw little need for professional advice may be open to a conversation with an experienced advisor.

To reach these investors, advisors need to be proactive. Here are three ways to get the process started.

1. A personal touch

Advisors today have access to client relationship management platforms and other applications that enable them to connect digitally with a large number of clients and prospects while maintaining the essential personal touch.

Using these tools, advisors can identify content that would be relevant to investors based on certain demographic, life-stage, or financial profiles – or even based on the content with which they like to engage. In just a few clicks, advisors can personalize content and messaging and deliver it using clients’ preferred digital communication channels.

All of this happens so quickly and easily that the advisor can respond almost immediately to events in the markets – and in a client’s life – with educational and insightful content.

However, digital content is not a full replacement for personal outreach. It’s simply a starting point that provides a reason and opportunity for the advisor to initiate an informed conversation on a topic important to the client.

2. Financial planning is the difference

Millennials and young investors have no shortage of data and educational materials.

Part of the do-it-yourself investing ethos is conducting research, and this new generation of investors has mastered the art of searching chat rooms and other parts of the internet for information and mining their self-directed brokerage platforms and other digital services for ideas.

What these investors can’t get from websites and robo-advisors is comprehensive financial planning from someone who knows them, understands their situations, and has spent time thinking about how they can achieve their financial and life goals.

Advisors who emphasize financial planning over pure investments will likely find a receptive audience.

A recent Broadridge Financial Solutions Inc.* survey shows that while baby boomers and other older investors seek out advisors mainly due to a perceived lack of financial knowledge, about 80 per cent of younger investors (millennials and Gen Z) say they work with an advisor to plan their holistic financial goals.

3. Blending technology and personal service

That type of informed conversation is especially important at a time when market drawdowns and volatility have disrupted investors’ plans.

For example, a young Canadian couple planning to buy a house might not know what to do after suffering significant losses in a portfolio intended to fund a down payment and closing costs. Generic, digital content might provide some broad guidelines about how to act during difficult markets, but an advisor who knows the investors and their portfolios can provide specific suggestions about how to get back on track.

In this case, that advisor might help the couple apply for a $5,000 First-Time Home Buyer’s Tax Credit to help offset some of the losses. In a dourer case, that advisor might offer a dose of reality the couple won’t get online. Perhaps the house purchase will have to wait another year while they ride out market volatility.

Blending technology and personal service is not just for prospecting. To the contrary, advisors should be using the same hybrid model to support existing clients. In fact, many advisors will find that clients who in the past were content to touch base once or twice a year are now eager to talk quarterly or even more often to discuss their portfolios and stormy markets.

Of course, to connect with younger investors, advisors will have to adapt.

That means advisors need to educate themselves about topics important to the new generation – such as cryptocurrencies and environmental, social and governance factors – and communicate through texts and other digital channels that might feel unfamiliar to the older advisor set.

But the first step is being proactive and initiating that outreach. Now that a bear market appears to have arrived, those young prospects, who once spurned professional advice, might just be waiting for you to call.

*Donna Bristow is chief product officer, wealth management at Broadridge Financial Solutions Inc. in Toronto.

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