The battle for next-generation clients is a long-term issue for the financial advice industry, and research has found younger investors are happy to look around to find their chosen investment provider.
Challenger wealth manager Netwealth surveyed over 1,000 Brits with investible assets of over £50,000 ($64,860, €54,921) and found over half (52%) are considering a move if their expectations on technology and transparency are not met.
During the lockdown period, over half of those aged 18-35 (54%) were concerned about their provider’s value for money, while 30% questioned the long-term feasibility of their relationship altogether.
Younger investors are most likely to use a DIY platform to manage their investments (33%), putting providers such as AJ Bell and Hargreaves Lansdown most at risk among this age group.
However, with others in the 18-35-year-old age bracket using a mix of private banks (25%), wealth managers (19%) and IFAs (19%), the whole industry is at risk of losing younger clients if they are unable to meet their demands.
Transparency is non-negotiable
All investors would like to see increased transparency from their wealth manager, the younger generation of clients are the most demanding in this respect.
Some 73% of 18-35-year olds expect to have greater transparency around fees compared to 66% of those aged 36 and above, while 79% want improved transparency on the performance of their investments vs 71% of their older peers.
During a period where investment returns are under considerable pressure, younger clients expect greater visibility over the performance of their portfolio and want to know where fees may be eating into their gains.
Trusted advisers will manage hit to confidence
Following the first lockdown, 79% of 18-35s want the ability to manage their investments online, i.e. opening and closing accounts or changing contribution levels, while 71% are looking for access to online financial planning tools.
That said, adviser expertise continues to play an important supporting role, with almost two-thirds (64%) of young DIY investors now wanting access to professional guidance or advice, while 67% of those that rely on wealth managers or IFAs are keen to receive regular market commentary and insights from their provider.
They also felt an annual face-to-face meeting with their provider was still important – even with social distancing restrictions – highlighting that younger investors see value in continuing to develop their adviser relationships, despite preferring to handle much of the management of their portfolios online.
Younger investors want providers to reflect their values
While transparency and trust are major considerations, alignment of values is also becoming increasingly important for younger investors following the impact of covid-19.
Some 78% stated that their wealth manager’s ESG offering would be more important to them post-lockdown, while 32% were concerned that their fees were simply paying for “swanky offices” and “expensive lunches”.
Those aged 18-35 were most likely to believe that their wealth manager demonstrated diversity and inclusion across its workforce, compared to those aged 36 and above (69% vs 45%).
Dissatisfaction
Charlotte Ransom, chief executive of Netwealth, said: “As the UK prepares for at least another six months of coronavirus restrictions, it is imperative that the industry takes heed of younger investors’ dissatisfaction during the first lockdown.
“With the long-term economic impact of the virus likely to hit the younger generation harder than others, these investors will be looking to their advisers for guidance and support during this period of uncertainty.
“While this tech savvy generation are keen to have the autonomy to manage their investments digitally, they still value a strong adviser-client relationship and want a balance between digital functionality and access to trusted expert advice.
“In a post-lockdown world, modern technology paired with those who are fully qualified to advise on and invest their clients’ wealth, will be key to giving younger investors’ confidence in their financial futures. Those that are unable to deliver on this front will struggle in the months and years to come.”
