Thompson: We are seeing affluent investor expectations for advice shifting to a more financial wellness orientation, and advisor performance will likely be based on a broader client experience measurement. Another trend involves the importance of transparency as a cornerstone of building client trust. Out of seventeen elements in the client/advisor relationship that are measured in our questionnaire, “providing transparency in interactions” emerged as the leading driver of client trust in their financial institution. And, from an advice delivery perspective, we believe banks continue to be in jeopardy of continued migration of younger investors to other channels.
Hortz: What is the difference between the term “next-gen” investor and the newer “selective” investor category you have determined?
Thompson: There is considerable overlap between the so-called “next-gen” and what we are calling the “selective” investor. The selective investor is neither a do-it-yourselfer nor a validator. A key hallmark of the selective orientation is a strong need to take control over their investments. And they are not a small or select group of investors: collectively, they represent over 60 percent of affluent households and over 80 percent of young, “next-gen” affluent investors.
Besides their need for investment control, there are other hallmarks of the selective investor: They are very actively involved in the day-to-day management of their finances. Selective investors are not opposed to getting professional advice; in fact, most use or have used a professional financial advisor for investment guidance or specific services. Attitudinally, they are risk-takers and open to new investment opportunities. They also tend to be less trusting of financial institutions, which goes hand-in-hand with their need for investment control.
Hortz: Why do you refer in your research to the latter as the selective “movement” and feel that they will fundamentally disrupt the traditional advice orientation model?
Thompson: The selective investor movement is, fundamentally, built on a fintech foundation. We believe they will disrupt the traditional advice orientation model in the following ways:
One, the selective investor expects to have the tools available from professional advisors to enable them to self-manage selected services such as stock or mutual fund selection or financial planning. And robo-advisors will no doubt be part of the self-management paradigm.
Two, they also expect tools that will enable them to take a holistic view of their finances and link all of their accounts.
Three, they place high importance on having access to their investments 24/7 through multiple devices, including mobile.
Four, the selective investors will turn to multiple sources of advice, including professionals, peer groups and social media. They have used a more diverse array of advisor channels than delegators, including bank-based advisors, accountants, online brokers, and insurance agents or brokers.