A new generation of investors is bringing new demands to wealth management. It’s not just stocks and bonds anymore, and alternative assets that didn’t exist a decade ago have suddenly become the buzz.
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Cryptocurrency, nonfungible tokens, meme stocks. A new generation of investors is bringing new demands to wealth management. It’s not just stocks and bonds anymore. Alternative assets that didn’t exist a decade ago are the buzz. Impact investment requires more than lip service.
At the same time, the digital age has made the market more accessible to young people.
The amount of information available to young investors is both a blessing and a curse, says Kathryn Brann, a financial advisor with Golden Pond Wealth Management in Waterville.
“Twenty years ago, you might hear about a bad day in the stock market just once on the evening news,” Brann says. “In 2022, that news might be repeated to you on three forms of social media and two push notifications.”
For financial advisors, the trends mean staying on top of the digital experience and client expectations, she adds.
We asked advisors about trends they’re seeing among younger generations looking to invest their wealth in new ways. Common threads? Markets are more accessible and more diverse than ever. But beware of online hype and instant gratification.
Kathryn Brann
Kathryn Brann is a financial advisor with Golden Pond Wealth Management in Waterville.
Mainebiz: Are you seeing younger generations looking to invest their wealth in new ways?
Kathryn Brann: Many of our younger clients are interested in buying investment properties to build passive real estate income. Almost every client under 50 wants to learn about environmental, social and corporate governance investing.
MB: Are you seeing new types of engagement by younger people in the market?
KB: I think this digital age has made the market more accessible to young people. They are able to access endless information and investment research, and have a handful of apps at their fingertips that make investing and trading quick and easy. It is great that more young people are investing, because time is on their side, but these apps can lead to overtrading. I also find that, because young people are comfortable researching online, they come to us with a solid understanding of basic financial concepts.
MB: Do younger investors bring new expectations to the wealth management industry?
KB: Younger clients expect transparency at all levels. They want to know what they are investing in, what services they are receiving, and the associated costs. Some of our younger clients have a more ‘traditional’ relationship with our firm in that they have delegated investment management and research to us.
MB: To what extent are the expectations of younger investors shaped by the ability to access advice anywhere, any time?
KB: Social media, online shopping and digital banking all provide instant gratification which is something investors cannot and should not expect from the stock market.
MB: How do these changes affect the way your firm operates?
KB: All younger investors expect a completely digital experience, so being able to provide that is important. The pandemic forced us to host digital meetings for all clients, which has strengthened our relationships with many young clients who often live out of state. Having been in business for 25 years, our firm is now serving second or third generation clients and, in many cases, multiple generations at once. The financial needs and goals differ across age groups, so typically Brian Bernatchez or Bert Languet (my colleagues at GPWM) will advise the older generation in a family whereas I am the advisor to the younger family members. This helps us develop our areas of expertise.
David Hanson
David Hanson is managing partner at IIS Financial Services in South Portland. He circulated our questions to his team and compiled the following responses.
Mainebiz: Are you seeing younger generations looking to invest their wealth in new ways?
David Hanson: Yes, cryptocurrencies, meme stocks and real estate are the most common investments that younger people bring up. A meme stock refers to the shares of a company that have gained a cult-like following online and through social media platforms. GameStop in January of 2021 is a good example. These online communities can build hype around a stock through narratives and conversations elaborated in discussion threads on websites like Reddit and posts to followers on platforms like Twitter and Facebook.
To select or request more info about these investments, they rely on friends’ research through the internet and social networks — both online and offline. Of course, heeding advice from friends is nothing new, but today the prevalence and accessibility of crowdsourced advice on trading platforms or online communities are overpowering.
The days when money was a taboo topic of conversation are gone. Instead, sharing everything from student debt to personal salary information is not just with friends and family but with audiences over social platforms.
Young investors increasingly consider environmental, social, and corporate governance factors when making decisions.
MB: Do younger investors bring new expectations to the wealth management industry?
DH: I think technology and the pandemic have changed how the wealth management industry operates. This includes offering paperless onboarding and digital tools such as video conferencing, goals-based advice, and financial planning to see if they’re on track to reach your goals in real-time with one easy login. Investors want things to be easy, info to always be at their fingertips, efficient and transparent. The days of paper applications, manila files, 100-page prospectuses and paper statements are by the wayside.
Many of our younger clients have outside brokerage accounts, which they link up and integrate into our financial planning portal, allowing us to see all their assets in one place. This includes a bank, mortgage, student loan information, etc.
MB: How do these changes affect the way your firm operates?
DH: Keep reinvesting in technology and create a high-level digital experience that’s customized and personal for the client. Gone will be the days of trudging into offices clutching a pile of paperwork at an appointed time.
Erin Barry
Erin Barry is CEO of Means Wealth Management in Bangor.
Mainebiz: Are you seeing younger generations looking to invest their wealth in new ways?
Erin Barry: First, we have to say each investor’s financial situation is unique, and our responses are not intended to act as individualized financial advice. But yes, there’s interest in new investments, some of which can be very volatile, meaning you can make, or lose, a lot of money quickly. Anyone considering any investment should first determine how it fits in with their overall portfolio and financial plan. Just like one probably shouldn’t invest 100% of their savings in the stock of one company, one also probably shouldn’t invest solely in one of these vehicles.
MB: Are you seeing new types of engagement by younger people in the market?
EB: Younger investors want to be digitally engaged with the stock market. This might be through using apps like Robinhood or by using social media to seek investment advice. Even though younger investors may behave differently than older investors, they are interested and seemingly more so than generations prior were at their age. It is important that we help younger investors keep that interest while also making smart, long-term investment decisions.
MB: Do younger investors bring new expectations to the wealth management industry?
EB: Younger investors are looking back at recent years and seeing overall market returns that well exceed the 10% long-term average annual stock market return. Living in an instant gratification society and looking for that quick return, we fear that some may feel the stock market is infallible and will continue to produce returns every year that are in the mid- to high teens.
We have also found that many younger investors want to be more involved in deciding what investments they do and don’t want in their portfolio. Some are interested in green energy; others dislike particular companies based on their social views. It is our job to help find them a portfolio that still works towards their goals but also matches their beliefs.
MB: To what extent are the expectations of younger investors shaped by the ability to access advice anywhere, any time?
EB: Younger investors are turning to social media channels for investment advice and validation. They may post to ask which cryptocurrency is the best or how to deal with a financial situation. Responses to their posts are almost instantaneous, providing that immediate gratification the younger generation is looking for. This is shaping the way the younger investor expects to deal with their advisor — they want that fast response and strong digital engagement. Fortunately, with technology today, it is very easy to provide and meet that level of expectation.
MB: How do these changes affect the way your firm operates?
EB: In an era where fad investing is rising in popularity and where one’s availability to invest their savings is literally at their fingertips, we believe it is even more important for us to ensure we are educating all investors. Because that younger generation is looking to obtain their information digitally, we as advisors must ensure we are prepared to meet these demands. That includes ensuring we have the appropriate channels in place to provide the digital experience these investors are seeking.
Ben Flood
Ben Flood is a managing partner with Bigelow Investment Advisors LLC in Portland.
Mainebiz: Are you seeing younger generations looking to invest their wealth in new ways?
Ben Flood: I’m hesitant to paint an entire generation with a broad brush because it really comes down to the individual that we are working with, and what their unique goals and preferences are. I have a client in his nineties that closely follows cryptocurrencies, and I have worked with younger investors that preferred a broadly diversified portfolio of index funds. We are all a case study of one.
MB: To what extent are the expectations of younger investors shaped by the ability to access advice anywhere, anytime?
BF: Information is easily accessible, which can be helpful, but it can also lead to confusion. This is especially true in an era where clicks lead to advertising revenue. We still find that individuals want to vet the information that they have received online through a trusted advisor.
The availability of information does allow investors to be more intentional about where they are allocating their capital, allowing them to better align their portfolio allocations with their personal preferences.
MB: How do these changes affect the way your firm operates?
BF: I don’t think that there is any substitute for a trusted relationship between a client and an advisor. That trust is built over time as our clients move through life and they depend on us to provide unbiased guidance to help them. Technology and information availability will evolve, but a trusted relationship will continue to be an important foundation to wealth management.
