In Focus: Profitable advice business  

Your client has changed, industry told

Your client has changed, industry told
Investment customers are now younger and less experienced, says Boring Money (RODNAE Productions)

Investment customers are now younger and less experienced, as the advice gap has reached £113bn in assets, according to Boring Money.

In a bulletin issued yesterday (June 22) Boring Money's chief executive Holly Mackay identified three trends shaping the world of retail investors.

She said customers had changed and were now younger and less experienced, as she challenged the industry to consider how it is communicating with those potential clients.

She said: "Crypto, meme stocks and lockdown cash savings happened, driving down average ages and bringing less experienced investors into the market.

"As the crypto meltdown coincides with the new bear market, sentiment meltdown is moving from spicier investment platforms to the mainstream and we hear early reports of redemptions. How are you communicating with these investors as threats of a recession loom?"

Myron Jobson, senior personal finance analyst at Interactive Investor, agreed young investors needed more help from the industry to make the correct choices, especially via digital platforms.

He said the past couple of years had seen a surge in young people dipping their toe in investments for the first time and many were gravitating to the likes of cryptocurrency and meme stocks.

“The challenge for the newly initiated is sorting the wheat from the chaff- which is difficult for those who don’t know what good looks like," he said.

"The concern is [that] young investors have experienced a baptism of fire by losing money – albeit paper losses – amid the crypto crash and the recent stock market volatility, which could put them off investing for life and, in turn, scupper their financial goals.

“Today’s young and inexperienced clients with relatively modest sums to invest are tomorrow’s high net worth individuals, so it in advisers’ interests to better cater to their needs.”

Mackay also identified a continued, albeit slow, increase in interest in sustainable investing, with the most popular brands for inflows being Aviva Investors, Fidelity, JP Morgan and Royal London.

She said the recent strength in the oil price had not translated to weaker consumer appetite for sustainable funds.

The oil sector was the highest contributor to UK dividends in the first quarter this year, rising 29 per cent according to Link Group's latest dividend monitor.

But according to Boring Money, half of fund investors are planning to increase the amount invested in sustainable funds in the next year, with 39 per cent saying they are planning to increase it by ‘a little’, according to the firm's sustainable investor tracker.

"Just 4 per cent plan to decrease the amount they have invested in sustainable funds," Mackay said.

Jobson said the war in Ukraine and the pandemic had fuelled demand for sustainable assets.

"ESG investing is here to stay, despite the recent underperformance of many ESG funds owing to a market rotation from quality to value stocks.

"The coronavirus pandemic has affected all aspects of life and has raised some fundamental questions about how we live and how we work, and the sort of planet we want to live in. Russia’s devastating invasion of Ukraine is also having an influence. Both are likely to fuel the budding demand for ESG solutions," he said.