Study of affluent Gen Z and Millennial investors finds an appetite for advice, so long as it goes past investment management
A CFA Institute survey of 2,400 mass affluent, high net worth, and ultra high net worth investors across six countries, including Canada, found that both Gen Z and Millennials still want to work with professional advisors. The kind of advice they want to receive, however, is changing dramatically. Rather than investment management, these clients want trust, multi-channel communication, and plans that cover their whole lives.
While the survey found that over 90 per cent of young affluent investors have used some form of paid financial advice, it found that what they expect from their advisors is changing. While the survey found that even among young investors, human advisors remain more trusted than online sources, robo-advisors, or generative AI, those other sources of advice are becoming more commonplace. Young people are also redefining what they mean by trust, going beyond a relationship into tangible evidence that this trust is earned.
“It really is a ‘we want more’ attitude. That puts some pressure on advisory firms and advisors to meet the diversity of demand that’s out there,” says Genevieve Hayman, PhD, Senior Researcher at the CFA Institute. “In Canada in particular, young Canadians are really looking for holistic financial advice. It’s not just about investment management for them. Around 82 per cent of young investors in Canada either plan to use or currently use professional support for things like budgeting and savings. Around 76% want to use it for financial education, 75% for insurance, 69% for facilitating family financial discussions, and over 60% want help with career trajectory and compensation.”
The survey found that young investors are taking on information from a wide range of sources. That includes finfluencers, AI, and other sources. All of that is contributing to a growing confidence among young investors. 20 per cent of Gen Z and Millennial Canadian investors surveyed said they were “extremely confident” in their investing abilities, with another 38 per cent rating themselves as “very confident.” Only 12 per cent of Gen X and Baby Boomers said they were “extremely confident.” While those young people may be confident in their abilities, Hayman believes they don’t want to do everything themselves. These investors may be more informed and engaged, but they want guidance.
That guidance, Hayman explains, is better received when it comes in the form of education rather than instruction. The survey found young investors are interested in collaborative relationships with their advisors. They don’t just want to delegate their decisions to advisors, they want to understand why they’re doing something. The survey found that this kind of service also has to be high touch, with 70 per cent of young investors engaging with their advisor at least monthly. That engagement occurs across multiple channels and platforms, including video calls, text messages, and in-person meetings.
For advisors seeking to provide support to confident clients, Hayman highlights the fact that the majority of young investors surveyed have made some kind of FOMO-driven investment, largely into crypto. Canadian HNW youth, notably, showed less propensity for FOMO investing, but around 45 per cent still report making an investment based on that fear of missing out. Advisors have to navigate the dynamics of a confident client, when that confidence can sometimes lead to mistakes.
Canadian results stood out in a few other notable ways. Hayman noted that, on the whole, young Canadian investors tended to be a bit more conservative around alternative assets, especially crypto. While 50 per cent of all young respondents held crypto assets, only 39 per cent of young Canadians did. A similar delta was found in private equity holdings. While Canadian clients still professed a preference for holistic advice, Hayman notes that returns tends to be a more important factor for Canadian clients than respondents in other countries when it comes to selecting an advisor.
Young Canadian investors joined their global cohorts in showing a preference for what Hayman calls “measurable trust.” Measurable trust goes beyond a friendly face-to-face relationship. It means advisors need to meet measurable outcomes, like performance relative to a benchmark. It means a preference for credentials and qualified expertise. It also means data security. Younger investors are keenly aware of cybersecurity risk, so demonstrations of that security are vital.
Firms can help meet these needs for trust by offering a wider range of services, in Hayman’s view. Helping to provide clients with the services required to support them in budgeting, planning, saving, and even building out their careers can help create that trust between the client, their advisor, and their firm.
Advisors will also have to demonstrate knowledge across a broad range of topics. Because more young clients are engaging with different sources of advice and education, including online financial influencers and robo-advisors, their human advisors will need to be able to answer more questions and engage across a wider range of topics. Hayman notes that human advisors remain the most trusted sources of information, which is a positive, but much of the advisor’s role for these young clients will rest on making sense of the constantly widening range of inputs and stimulus that these clients are now subject to.
“Be proactive,” Hayman says when asked what advisors should take from the study. “It’s a little more demanding in that sense. You have to stay ahead of the curve, know about a wide range of products, potentially deliver on different types of service offerings than in the past, and have more touchpoints than you normally would. But that’s the way to keep engagement up, and that’s ultimately what will drive clients to you and keep them for the foreseeable future.”
