"Given that millennials and Gen Z tend to be the most tech-savvy age groups, digital tools provide the obvious key to unlocking engagement with financial advice."
Younger people lead the way with digital adoption, opening up opportunities to usher them into advice. But millennials and Gen Z aren’t the only demographic embracing new technology.
How we engage young people with financial advice is a much-debated topic. Data compiled by the Financial Conduct Authority found that only 6% of 18 to 34-year-olds sought advice during 2017. That’s a startling figure considering the breadth of financial challenges this demographic faces: accelerating property prices, rising student debt, and the combination of increased longevity and dwindling defined benefit pension schemes are all putting greater onus on the importance of long-term financial planning.
However, the low uptake for advice by younger people is not necessarily a fair reflection of their overall financial engagement. We only need to look at recent behaviour on some of the largest direct to consumer platforms. Between 2012 and 2020, the average customer age on Hargreaves Lansdown fell from 45 to 37. Although these investors are not seeking advice now, it is encouraging to see more younger customers investing. Hopefully, it will lead to a greater willingness to seek professional support as their needs become more complex.
Advisers are beginning to sense the opportunity presented by younger clients. According to a report by wealth manager, Charles Stanley, one in three (30%) advisers expect the age at which clients first engage with their services to lower over the next five years, with more than two-thirds anticipating greater engagement from younger people over the next 12 months. A quarter of advisers are actively targeting them.
Given that millennials and Gen Z tend to be the most tech-savvy age groups, digital tools provide the obvious key to unlocking engagement with financial advice. In fact, this is true of all customers; although there is a demographic divide when it comes to digital adoption, it’s not as wide as you might think. The Office for National Statistics reported that in 2008, just 16% of people aged 65 and over shopped online. By 2020 this figure was 65%. In addition, nearly half of people in this age group now bank online.
Interestingly, registrations to the intelliflo personal finance portal are fairly even across age groups and usage is highest among the over 50s. While this is presumably due to the proximity of retirement fuelling these clients’ engagement with their finances, it suggests that if you make intuitive digital tools available, people will embrace them.
For advisers it is becoming increasingly important to ensure your systems provide easy access to the information the client wants at whatever phase they are in their financial lives. In its recent joint evaluation of the retail distribution review (RDR and financial advice markets review (FAMR), the FCA highlighted the need for the industry to look at ways to widen access to advice. It said, “Although there has been some innovation in the market, in particular around the development of automated advice, there is more scope for further development and innovation of models and services that could serve more consumers at different stages of their lives.”
The traditional IFA model continues to provide exceptional service to wealthy customers, clients with complex financial planning needs and those around retirement. Best use of technology has been proven to enhance efficiency and streamline administration to maximise the clients you can manage while driving engagement. But most advice firms find that it’s not cost-effective to extend this model out to less affluent groups. For advisers seeking a broader range of clients, digitalising elements of the advice process can help deliver an effective, affordable solution providing personalised, simplified advice. By finding ways to widen access to financial advice, we can help more people make better long-term decisions and achieve their personal and professional goals.
While younger people are clearly at the forefront of digital adoption, technology can help clients of all ages engage better with their finances. We need to ensure that the digital age of advice is rolled out across all ages.