The COVID Crisis also impacts their investing approach. Younger Americans are more likely than all American adults to decrease contributions to their qualified retirement savings plans (15% vs 10%) and far less likely than all adults to stay the course (25% vs 42%). When it comes to their non-qualified investments, such as stocks, mutual funds and ETFs, they are also more likely than all adults to take money out of the stock market (15% vs 10%) and less likely than all adults to stay the course (21% vs 35%). What they need is your expertise to develop a long-term holistic strategy—and your help to stick with it.
Prioritizing Protection
While portfolios have bounced back from record declines, ongoing volatility remains a top concern. But there is a silver lining. Younger Americans are prioritizing financial protection. In fact, they are more likely than Americans overall to recognize the need for annuities to protect assets against market risk (58% vs 47%) and to protect their retirement income (61% vs 48%).
And while younger clients struggle to meet their own financial needs, caring for others is also among their top concerns. Americans 18–34 are far more likely than all American adults to recognize the need for life insurance (70% vs 57%) and more likely to recognize the need for long-term care insurance to protect themselves and the people they care about (63% vs 56%). They are also more likely to be worried the pandemic will impact their ability to fulfill potential caregiving responsibilities for others due to financial strain (58% vs 44%) or due to their own illness caused by COVID-19 (52% vs 42%).
Trust Must Come First
When it comes to nurturing client relationships, trust comes first. While advisors top the list of trusted sources for all American adults during the pandemic, younger Americans said family and friends are number-one. So, what can you do to gain their trust?
Our Nationwide Retirement Institute has completed another soon to be published study revealing more effective ways to build and maintain strong relationships with clients. We looked at two types of trust—cognitive trust and affective trust—to determine which is more likely to drive a client to work with an advisor in the future. Factors like product performance and service experience drive cognitive trust, or “trust from the head.” Factors like empathy and perceived similarity drive affective trust, which comes from an emotional connection.
Our research shows that affective trust is a far greater predictor than cognitive trust, and the most significant driver of affective trust is empathy. These results are consistent across gender and a wide range of age and asset levels, making it clear that empathy—alongside your expertise—is essential in your everyday practice. Building affective trust is more important than ever, as your younger clients’ lives have been upended by the pandemic. It remains crucial in the months ahead, as the economy begins to re-open, exposing them to new challenges and new fears.
Protect Your Clients And Your Practice
While they may be struggling right now and challenged by the pandemic for months to come, younger Americans have tremendous potential to earn more wealth and inherit their share of the $30 trillion Great Wealth Transfer. They are better educated than any generation before them. They are skilled at leading new innovations and launching new trends. Adapting to change has been a part of their entire lives—from the latest streaming service to the shiniest handheld devices, from the Crash of 2008 to the pandemic’s “New Normal.” Younger clients’ financial futures depend on you—and the future of your practice depends on them. Help them solve their COVID concerns now, and your firm can secure a client for life.
Craig Hawley is head of Nationwide’s annuity distribution.