Investors in the Baby Boomer generation have long set the standards for advice delivery in financial planning. Their relationship preferences have helped shape the industry, but the latest research we’ve conducted at Fidelity Institutional® shows that younger investors in Generations X, Y, and Z have a whole new agenda.

All data in this article, unless otherwise indicated, comes from the 2021 Fidelity Investor Insights Study. We screened participants of the study for a minimum level of investable assets, ranging from $50,000 to over $10 million, and grouped respondents into three generational groups:

• Gen YZ: 40 or younger
• Gen X: 41 to 56
• Boomers+: Over 56

These groups have markedly different preferences and expectations when it comes to a financial planning relationship. Advisors everywhere will need to eschew the type of relationship they’re accustomed to and adapt accordingly.

A Quick Look at the Traditional Model of Advice

The financial planning relationship that Boomers+ desire may seem familiar—it typifies the way financial professionals have operated for some time. There are a few key characteristics that define Boomers+ planning relationships:

• Hired a local advisor
• Relied on personal referrals
• Filled out forms and received paper statements in the mail
• Got information from TV and newspapers
• Attended annual in-person meetings
• Advisor focused on money management and investment returns
• Advisor focused on only immediate family members
• Goal was to retire comfortably

Understanding the hallmarks of a traditional financial planning relationship is important because newer generations of clients are necessitating change.

Our research shows that Gen XYZ investors are upending nearly every one of these traditional aspects of advice. These digital-savvy, debt-laden, wellness-focused individuals are expecting a whole new type of relationship, and much of this stems from the current financial situation they find themselves in.

A Snapshot of Gen XYZ Finances

Gen XYZ has vastly different financial circumstances when compared to Boomers+, both because of the life stage they’re in and because of other social and economic influences that Boomers+ did not contend with at the same age, such as the following:

The Pandemic Hit Gen XYZ Hard

Younger generations are less likely to be established in their career or have savings. In fact, following 2020, 23 percent of Gen YZ said they were behind where they were a year ago and nearly half said their family situation has gotten more complex.

They Have More Goals, More Obstacles, and More Debt

Gen XYZ has a lot of financial goals, from saving for retirement to buying a car, which isn’t surprising given their life stage. Boomers+ have far fewer financial goals by comparison.

Interestingly, Gen XYZ also reports far more obstacles to achieving these goals, particularly those that involve personal fears and behaviors. Forty-eight percent of Gen XYZ named fears and behaviors as obstacles to their goals. These were things like being afraid to make a mistake, procrastinating, or being unclear on what actions to take.

On top of these deeply personal obstacles, 80 percent of Gen XYZ have some form of debt, more than twice the number of Boomers+. Mortgages, credit cards, and auto loans led the way in terms of the types of debt these generations face.

They Love Robo-advisors and Human Advisors

Despite these financial obstacles, over 90 percent of Gen XYZ manage some portion of their portfolio themselves. A majority of those surveyed said they enjoy investing, feel knowledgeable about investing topics, and feel that they don’t need help with their investments.

They do, however, enjoy working with financial advisors. Even more than the Boomers+ generation. In fact, 83 percent of Gen YZ and 71 percent of Gen X currently work with an advisor. Together, that’s 75 percent of Gen XYZ that works with an advisor, compared to 74 percent of Boomers+.

With such a high number of Gen XYZ investors using financial advisors, the truth is that what these individuals want is changing the industry right now. Gen XYZ investors are already your clients. Their relationship expectations aren’t just shaping the future of advice—they’re effecting change now.

What Does Gen XYZ Want in a Financial Planning Relationship?

With an understanding of Gen XYZ’s current financial circumstances, it’s easier to see why these generations are upending the traditional tenets of financial advice. Our research shows there are a few key ways that Gen XYZ preferences have consequences for financial professionals.

Less Likely to Hire Their Local Advisor

Gen XYZ doesn’t want to be confined to their local financial advisor. They’re more likely to look outside their immediate vicinity and more likely to use multiple advisors.

• 59% of Gen XYZ hired an advisor outside of their local area.¹
• 35% of Gen XYZ worked with more than one advisor.¹

Financial professionals hoping to acquire Gen XYZ clients may have to expand their marketing reach and prepare for entirely digital relationships.

Care Most About Online Information

Younger generations place the most weight on information they’ve found online, in stark contrast to older generations that relied more on personal referrals.

• 53% of Gen XYZ rely on online information when searching for a financial advisor, compared to just 5% of Boomers+.¹

Gen XYZ still cares about personal or professional referrals, but their go-to source of information is the internet. Once again, financial professionals will have to adapt to the way that next-generation clients are searching for advice if they want to grow their client base.

Expect a Seamless Digital Experience

Perhaps unsurprisingly, digital-native generations have a much higher expectation for an exceptional digital experience.

• 65% of Gen XYZ prefer a paperless experience.
• Almost 2/3 Gen XYZ respondents said they want working with their advisor to be as easy as working with Amazon or Uber.
• 34% of Gen XYZ have some assets managed by a robo-advisor, compared to 1% of Boomers+.

Financial professionals must be able to deliver a familiar and seamless digital experience to all clients.

Interact on Social Media

Social media is the educational tool for financial professionals moving forward. They need to be on the channels their clients are using most.

• 48% of Gen XYZ said they were more likely to relate to a financial advisor with a social media presence, compared to just 4% of Boomers+.
• Nearly 1/4 of Gen XYZ has interacted with their advisor via social media in the past year.
• Almost 60% of Gen XYZ said they frequently leave online reviews of products and experiences.

Social media-savvy financial professionals will likely have a far better chance at connecting with Gen XYZ. This generation turns to social channels for information and communication, presenting a big opportunity for advisors who can leverage these outlets for relationship building purposes.

Want More Frequent Interaction

Not only does Gen XYZ interact with their advisors on social media, but they also want more frequent interactions than their older counterparts.

• Gen XYZ had 7.5 average annual interactions with their advisors, compared to 5.8 for Boomers+.
• The leading reason for dissatisfaction with an advisor among Gen XYZ was the desire for more frequent interactions.

These interactions don’t necessarily refer to in-person meetings—they could be emails, social media messages, phone calls, or any other type of communication. Having a personalized, multi-channel client communication plan in place will be important for retaining Gen XYZ clients.

Desire Services Beyond Investment Management

Gen XYZ is clear about their desire for services beyond investment management. This is quite possibly one of the most significant and consequential differences between generations.

• 72% of Gen XYZ said they want services beyond investment management, compared to less than a third of Boomers+.
• 65% of Gen XYZ said they want investments to better align with their values.

The traditional model of advice focuses primarily on investment performance and retirement. Gen XYZ wants advice on a much broader spectrum. They want to work with an advisor that engages with all their financial goals, their values and helps them achieve higher-order goals around peace of mind and fulfillment.

Adapting to a New Type of Financial Planning Relationship

It’s important that your practice can accommodate a new type of financial planning client, and it’s important right now.

Between May 2020 and May 2021, 42% of Gen YZ and 28% of Gen X started working with a new advisor. In the same time period, only 1% of Boomers+ started working with a new advisor. Gen XYZ may not give you a second chance if you’re not meeting expectations.

To better understand this trend, we took a look at what factors drew Gen XYZ clients to one advisor over another. We found that the more respondents agreed with the following statements, the more likely they were to consolidate their assets to an advisor:

• My advisor helps maximize my short-term returns.
• My advisor has recommended Environmental, Social, Governance (ESG) solutions.
• My advisor helps facilitate family meetings.
• My advisor meets my expectations for a digital/paperless experience.
• The fees charged are fair and reasonable.
• I trust my advisor to make decisions in my best interest.

Many of the trends we’ve already discussed are apparent here: creating a meaningful digital experience, engaging with clients on a deeper level, mapping investments to values, and caring about the client’s extended circumstances.

Interestingly, improving your operations in these areas may strengthen relationships with older investors, too. We ran the same analysis on Boomers+ investors and found that they’re more likely to stay with their advisor when that advisor communicates regularly, follows up on key action items, and cares about them as a person beyond their financial needs.

9 Questions to Help Gauge Your Firm’s Progress

Even if you’ve already put in work to transform your practice for the future of financial planning, do you think that your Gen XYZ clients would agree?

Here are some questions you may consider:

1. Are you advertising online so you can compete outside of your local geography?
2. How are you managing your digital reputation?
3. Would your clients say that onboarding was a welcoming and seamless process?
4. Are you sharing content regularly online?
5. How often are you engaging with clients each year?
6. How do you help clients solve their debt issues?
7. How often are you asking clients about causes and issues that are important to them?
8. Are you comfortable talking about emotions, difficult life events, and complex family structures?
9. Do you speak to them about their wishes, dreams, and purpose in life?

Boomers+ have long set the standard in the financial planning profession, but new generations of clients—clients you’re already working with—are toppling tradition.

According to our research, the successful financial professional in today’s market must meet high expectations for advice: an exceptional digital experience, more frequent touchpoints on new channels, services beyond investment management, and even potentially beyond financial planning. But those who do meet expectations have an incredible opportunity to work with a generation that loves advisors and desires a deeper, lasting relationship focused on a broader view of their well-being.

Sources:

1. The 2020 Fidelity Financial Advisor Community—May COVID Crisis Study. The study was an online blind survey (Fidelity not identified) and was fielded during the period May 15 through May 21, 2020. Participants included 408 advisors who manage or advise upon client assets either individually or as a team, and work primarily with individual investors. Advisor firm types included a mix of banks, independent broker-dealers, insurance companies, regional broker-dealers, RIAs, and national brokerage firms (commonly referred to as wirehouses), with findings weighted to reflect industry composition. The study was conducted by an independent firm not affiliated with Fidelity Investments.

2. The 2021 Fidelity Investor Insights Study. The study was conducted during the period May 15 through June 7, 2021. It surveyed a total of 1,974 investors, including 773 Millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding employer-sponsored retirement assets and primary residence), age, and income levels.”

eMoney Advisor LLC is a Fidelity Investments company and an affiliate of Fidelity Brokerage Services LLC and National Financial Services LLC.

Fidelity Institutional® provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC. 1010949.1.0

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