Financial advisers clinging to traditional “delegating models” in hopes of attracting Generation Z are in for a rude awakening. This new generation, poised to inherit a staggering £5.5 trillion in assets over the next 30 years, has no need for your outdated services. The rise of “finfluencers” has shattered the information asymmetry that once defined the financial advisory landscape, creating a well-informed and empowered cohort of young investors.
The World Economic Forum’s (WEF) Future of Financial Advice white paper highlights the seismic shifts in the profession, driven by social media’s role as a primary source of financial information. Gen Z investors are increasingly turning to influencers, who democratise financial advice and present it in a relatable, trustworthy, and inclusive manner. According to the WEF, financial institutions must adapt by recognising the new data and influences shaping young investors’ decisions.
Financial advice is increasingly focused on holistic well-being, encompassing various aspects like debt management, retirement planning, and savings.
The Influence of Social Media
According to FT Adviser, research from the Chartered Financial Analyst (CFA) Institute cited in the report shows that 38% of Gen Z investors in the UK consider social media influencers a major factor in their decision to start investing. A staggering 90% of these investors take action based on their learnings from finfluencers, with 23% relying solely on this content without seeking additional information. This trend underscores the need for financial firms to evolve their strategies.
Gen Z and millennials flock to social media for financial advice due to its relatability and the sense of trust it fosters. The WEF report emphasises that a firm’s social media presence is now a critical component of its value chain. To connect with young investors, advisers must eliminate jargon, create interactive experiences, and hire advisers who reflect the demographics of their target audience.
Embrace Transparency and Authenticity
Transparency around fees and investments is crucial, as young consumers are hypersensitive to inauthentic marketing. The new generation of investors seeks connections with companies and communities where they feel seen and valued. The “next frontier” of social investing, according to the WEF, will involve creating communities that provide financial advice and education tailored to the unique needs of young investors.
Regulating finfluencers poses challenges, but the WEF urges regulators to consider the broader landscape of individuals engaging with these influencers. Cross-border collaboration is essential to develop guidance and policies that ensure trustworthy content from finfluencers and social media platforms.
Comprehensive financial planning can save households significant amounts annually and improve overall financial security.
Adapting to Survive
For advisers, the message is clear: engage with new generations of investors on their terms, including through social media platforms, to humanise your brand and build personal connections. Firms must transition from intermediation and distribution models tailored to boomers to a focus on democratisation and decentralisation for younger generations who demand control over their finances.
The existential threat facing traditional financial advisory services can only be mitigated by adopting empowering tools and services that resonate with Gen Z. This means shifting from “done-for-you” models to providing the autonomy and informed choice that young investors crave.
Financial advisers must rethink their approach or risk becoming obsolete. The era of information asymmetry is over, and the future belongs to those who can adapt and innovate in response to the needs and preferences of a well-informed, empowered generation of investors.
By embracing these changes, financial advisers can remain relevant and play a pivotal role in guiding the next generation of investors. The time to act is now, as the landscape of financial advice is rapidly evolving under the influence of social media and the empowerment of young investors.
The Role of Holistic Financial Planners in Empowering Self-Directed Investors
As the financial landscape evolves, a new breed of investors is emerging—empowered individuals who prefer to take control of their financial destinies. These investors, often well-informed and tech-savvy, seek guidance that complements their autonomy rather than traditional intermediation. Holistic financial planners, who are not financial intermediaries, are uniquely positioned to meet the needs of these self-directed investors.
Understanding Holistic Financial Planning
Holistic financial planning goes beyond mere investment advice. It encompasses a comprehensive approach to managing an individual’s financial life, integrating various aspects such as:
- Budgeting and Cash Flow Management: Ensuring that day-to-day financial activities align with long-term goals.
- Debt Management: Strategies to effectively handle and reduce debt.
- Retirement Planning: Preparing for a financially secure retirement.
- Tax Planning: Optimising tax liabilities through strategic planning.
- Insurance and Risk Management: Protecting assets and income against unforeseen events.
- Estate Planning: Planning for the distribution of assets and legacy considerations.
Distinguishing Distribution from Planning
While distribution and planning have historically been viewed as synonymous within financial services, they are fundamentally distinct concepts. Distribution refers to the process of selling financial products and services, often involving intermediaries who facilitate transactions and earn commissions. In contrast, financial planning is a comprehensive, strategic approach focused on helping individuals achieve their financial goals through tailored advice and holistic management of their finances. This distinction is crucial, as planning prioritises long-term financial well-being and personalised strategies, whereas distribution primarily emphasises the transactional aspect of financial services. Understanding this difference highlights the value of holistic financial planning in empowering individuals to take control of their financial futures without the biases that can accompany product-driven distribution models.
The Appeal to Empowered Investors
Empowered investors, often from younger generations, value control and transparency. They are comfortable with digital tools and social media for financial education and decision-making. For these individuals, traditional financial advisory services, which may rely on intermediation and commission-based models, are less appealing. Instead, they seek:
- Autonomy: The ability to make their own financial decisions with expert guidance.
- Transparency: Clear, upfront pricing models without hidden fees or conflicts of interest.
- Customisation: Tailored advice that fits their unique financial situations and goals.
- Educational Support: Access to resources that enhance their financial literacy and decision-making capabilities.
How Holistic Financial Planners Serve Self-Directed Investors
Holistic financial planners offer a partnership model rather than a traditional client-adviser relationship. They provide the tools, education, and support that empower investors to manage their finances independently. Key ways they serve these investors include:
- Educational Resources and Tools: Providing access to financial planning software, educational workshops, and personalised financial planning advice that equip investors with the knowledge to make informed decisions.
- Fee-Based or Subscription Models: Offering clear and flexible pricing structures that avoid the conflicts of interest inherent in commission-based models.
- Comprehensive Financial Plans: Crafting detailed financial plans that cover all aspects of an investor’s financial life, ensuring no area is overlooked (options, done-by-you/ DIY, done-with-you/ collaborative/ groups, and done-for-you/ 1-2-1).
- Ongoing Support and Guidance: Being available for consultations and updates as the investor’s financial situation and goals evolve.
- Empowerment through Technology: Leveraging digital platforms and tools to provide real-time financial insights and facilitate easy access to advice.
Conclusion
As the financial advisory landscape shifts, holistic financial planners who eschew traditional intermediation are perfectly positioned to meet the needs of self-directed, empowered investors. By focusing on education, transparency, and comprehensive planning, these planners enable investors to take control of their financial futures with confidence. This approach not only aligns with the values and preferences of modern investors but also fosters a more informed and financially secure society.
Key Findings from the WEF Future of Financial Advice 2024 White Paper
- Technological Advancements:
- Technological innovation is transforming financial advice, making it more accessible and personalised.
- Tools like generative AI and machine learning can automate processes and enhance adviser productivity, though they bring challenges like data privacy and bias management.
- Changing Demographics:
- Significant wealth transfers and increasing diversity among investors necessitate innovation in financial advice.
- Younger generations, women, and people of colour are becoming more prominent in the investing landscape, requiring financial institutions to adapt their strategies.
- Holistic Financial Well-being:
- Financial advice is increasingly focused on holistic well-being, encompassing various aspects like debt management, retirement planning, and savings.
- Comprehensive financial planning can save households significant amounts annually and improve overall financial security.
- Digitally Accessible and Hyper-Personalised Services:
- Investors expect digital accessibility and personalised experiences from their financial institutions.
- Hyper-personalisation uses data analytics to tailor advice to individual needs, enhancing trust and inclusivity.
- Transparent and Flexible Pricing:
- There is a shift towards transparent, fair, and flexible pricing models, moving away from traditional commission-based structures.
- New pricing models include fee-based, subscription-based, and hybrid structures, catering to diverse investor preferences.
- The Role of Social Media and Finfluencers:
- Social media and finfluencers play a significant role in democratising financial advice and influencing young investors.
- Financial institutions must engage with social media to meet younger investors’ needs while addressing potential risks and regulatory challenges.
- Calls to Action:
- Financial institutions, regulators, and social media companies need to collaborate to improve access to trustworthy financial advice.
- Emphasis on building diverse adviser teams, innovating digital solutions, and enhancing financial literacy through transparent and inclusive education.
Download the WEF White Paper.
Summary
The financial advice landscape is rapidly evolving due to technological advancements, changing demographics, and the influence of social media. Financial institutions must innovate and adapt to provide holistic, personalized, and transparent services that cater to the diverse needs of modern investors. Collaboration among industry stakeholders is crucial to navigating these changes and ensuring financial resilience and well-being for all individuals.
M-POWER: The Money Empowerment Movement
By aligning with the M-Power Movement, the Academy of Life Planning demonstrates its unwavering commitment to financial empowerment. This partnership enhances our mission to provide comprehensive planning services, education, and tools, enabling individuals to take control of their financial futures. We believe in fostering a fairer society where financial knowledge is accessible to all, breaking down the barriers of traditional financial services. Together, we are redefining excellence and trust in the financial planning industry. Join us in this transformative journey.
For more information visit www.academyoflifeplanning.com.
Academy of Life Planning 
One thought on “Financial Advisers: Rethink Your Approach for Gen Z or Face Irrelevance”