New, Younger Investors Wary Of Advisors

By Cyril Tuohy

InsuranceNewsNet

The financial crisis of 2008 and the explosion of social media as a way to tap into sources of investment advice have given rise to a new and very different kind of young investor, one with a fair amount of skepticism about financial advisors.

That’s the conclusion of the consulting firm Accenture in a new report issued earlier this year titled “Generation D: An Emerging and Important Investor Segment.”

“Surprisingly, the millennial generation has emerged from two boom-and-bust cycles even more conservative about investing and more skeptical of financial advice than the generations that were hit hardest by the market,” said Alex Pigliucci, global managing director of Accenture Wealth and Asset Management Services.

“Generation D,” a swath of investors 75 million strong that cuts across so-called millennials, Generation Xers and the baby boomers, poses a “a fundamental challenge” for advisors who want a piece of what has often been called the largest wealth transfer in history, Pigliucci said.

Made up of 26 percent millennials, 48 percent Generation Xers, and 25 percent boomers, Generation D represents 44 percent of the U.S. population with nearly $27 trillion in assets that will be passed on to heirs in the coming decades.

Though the opportunity is huge for advisors, members of Generation D are less likely to view advisors as a trusted resource for investment counsel than previous generations, the survey found. For example, a total of 59 percent of Gen D members actively sought advice recently but only 40 percent looked to their financial advisor for guidance, the survey found.

“We were surprised at how conservative the millennials were,” said Accenture's Mark Newcomer, in an interview with InsuranceNewsNet.  Millennials equate investing in the market consider gambling, and that will require advisors to rethink their strategy.

“Financial advisors need to be very careful to correctly estimate the investment style of their client and then when they understand that, they have to go out and find the right product to reach the investment goal,” Newcomer said.

Generation D skepticism toward financial institutions is most prevalent among the millennials, with this group of 21- to 30-year-olds seeking information across multiple channels to confirm or corroborate investment advice.

While 71 percent of Generation D milliennials are currently investing, only 22 percent do so through an advisor, the survey found, and as many as 28 percent of millennials would not take a financial advisor’s advice without first consulting another source.

Gen Xers, meanwhile, are as likely to be self-directed investors as they are to use a dedicated advisor, while boomers still value a personal relationship with their advisors, the survey found.

All of which raises important questions about what Pigliucci said was a “seismic shift in the client-advisor relationship,” one that will have to be redefined by transparency and taking the mystery out of financial products and how they work.

“Wealth mangers who provide transparency, education and tools that make investing easier to understand – and those that provide the rationale behind the recommendations – will be positioned to achieve trusted-advisor status among market-leading demographics,” Pigliucci said.

The ability to offer digital resources – online communities, Internet-based video seminars and webinars, virtual meetings with advisors, investor-led online education and connecting through social media and wealth manager blogs – will play “a pivotal role,” in reaching Generation D.

Members of Generation D, often more conservative and risk averse than many advisors give them credit for, are going to expect digital, online and mobile channels to be “seamlessly woven into the overall customer experience,” the report said.

“Financial advisors need to rethink how they work with the customer and think through the role of social and digital channels,” said Newcomer.

Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].