Investing for the next generation

Posted On August 21, 2014

Financial advisors are struggling to find the best way to connect with young investors. According to Forbes, younger generations are taking matters into their own hands – creating businesses that adapt to the Millennial way of thinking. These savvy entrepreneurs are taking the principles of DIY investing and marrying them to financial advisory to recreate the investment experience so that it mirrors the values of the younger generations.

Wealthfront, an investment company highlighted in the piece, offers a “refer-a-friend” bonus that comes in the form of an increased cap on the assets managed at no cost. While older generations would likely pale at the idea of such an approach – especially when it comes to personal finances – younger generations don’t consider money a taboo subject and are happy to share a friend’s email if they believe in the company (and are getting a deal). They’ve been active participants in social marketing for years.

Each of the companies discussed in the article takes a different approach to human interaction – that is the role of the actual financial advisor. On one end of the spectrum, there is almost no human interaction as investment advice is based on algorithms and industry trends, on the other – human advisors exist, but are wholly virtual and unavailable for an in-person meeting.

Jon Stein, co-founder of Betterment, tells Forbes “We are the leaders of a movement that now has a sense of inevitability about it that it didn’t four years ago.” If this is the case, what can today’s financial advisors learn from this movement?  From my vantage point it is again, about understanding the value of each generation. Time, money, knowledge, efficiency, trust – they all mean different things to different groups. Figuring out how to adapt your business to connect with those values is critical to long-term success.

Categories: Financial Services, Generation Y / Millennials