Next-gen investors: Challenges and opportunities

E*TRADE Advisor Services


For many potential young investors, the perception that investing requires a high level of financial sophistication is a major roadblock to taking that leap into an unknown environment. Advisors can provide real value by breaking down these perceived walls and educating younger generations about the best strategies for achieving financial success—especially through digital channels, which have become even more vital during the coronavirus pandemic.

Social media can provide a wealth of financial information, and the rise of high profile day traders has perhaps provided some fresh inspiration—but at the same time, young investors may experience an uphill battle against a false sense of reality, incorrect information, and “keeping up with the Joneses.” Because today’s young investors are fundamentally different in how they consume information, advisors need to adapt their approach to financial education in a way that addresses their tech-forward lives.

Social media algorithms have the ability to pinpoint exactly what users are looking for and deliver it right to their doorsteps. Young investors are looking for that same type of ease and personalization when it comes to how they receive investing information, so it’s incumbent on our industry to deliver digestible insights and best practices.

Becoming a financial resource

The first step in increasing financial literacy in younger generations is education.

Advisors can help break down barriers when it comes to talking about money and empower young investors to kickstart their financial futures. Virtual volunteering with a local school or hosting an online  “open house” online are great ways to create a familiar and safe learning environment in which students can get their investing questions answered and start a dialogue with a financial expert.

It’s also important to help the younger generation understand money isn’t just something that’s on their phones. Unlike their parents and grandparents, much of the younger generation is growing up in a world where physical money is rarely used. From apps that allow you to pay friends and retailers with a click of a button, to brick-and-mortar stores that don’t accept cash, the concept of what a dollar represents is shifting. It can be a big hurdle for young people to understand how money can be invested when they don’t fully appreciate it as a monetary instrument.

Making an impact

Despite such obstacles, the good news is that the next generation is looking to build solid financial habits. Advisors can take a few concrete steps to help them on their path:

  • Engage your clients’ children. Add value by getting to know all the members of your client’s household. Developing relationships with clients’ children can help build their financial acumen, establish trust, and lay the groundwork for future interactions.
  • Leverage account aggregation. Managing multiple accounts can be overwhelming for young investors, especially when they’re juggling both debt and assets. Bundling everything from a 401(k) plan to a traditional brokerage account and student loans can help advisors create a complete financial picture that’s easier to understand and helps shed light especially on the impact of student debt on any financial goals. While account aggregation can benefit many types of clients, young investors may especially benefit from seeing how various aspects of their financial lives interconnect.
  • Consider fee schedules. Combined with recent moves to provide commission-free trading, offering the option of an annual subscription model versus a more traditional asset-based fee structure can significantly reduce the barrier to entry for first-time investors.

For many young investors, saving for the future takes a backseat to the here and now. By providing greater guidance, advisors can help the younger generation feel confident about their decisions and increase their appreciation of advisor relationships.

Contact us to learn more about E*TRADE Advisor Services, and follow us on Twitter (@etrade4rias) and LinkedIn for the latest advisor insights.

A version of this article first appeared in Wealth Management

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