Business SupportMay 28 2020

Advising generation Z

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Advising generation Z

In recent years, businesses have been obsessed with the millennial generation, and while they will remain an important client base for many for decades to come, forward-looking businesses are adapting to cater to their successors, Gen Z.

Gen Zs are usually defined as those born between 1995 and 2010. The older cohort, in their late teens or early twenties, are already gaining exposure to the world of investing.

And wealthier Gen Zs – those fortunate enough to have inherited wealth, as well as those that have already created entrepreneurial wealth (not unusual despite their age) – are placing new demands on wealth managers.

Knowledgeable (but not yet streetwise) investors

Gen Zs are generally far more knowledgeable than older generations were at the same age. Improvements in formal education as well as the availability of vast amounts of information online have seen to this.

And with some knowledge comes a thirst for more. Gen Z wants to know the logic behind any investment idea. 

Gen Zs are also very ‘worldly wise’. They want to know the positive and negative impact of their investment portfolio. Wealth managers should not be surprised by an instruction to exclude fossil fuel companies entirely.

And while millennials have been instrumental in driving the environmental, social and governance trend, Gen Zs are more focused, with climate-related issues overwhelming other areas of ESG investing.

This is undoubtedly because they will be feeling the consequences of climate change more than older generations.

But, and this is admittedly a generalisation, Gen Z’s impressive education and knowledge has not (yet) translated into investing knowledge.

We have seen them tempted by social media and memes to invest in inappropriate or ultra-high-risk instruments such as the Vix and cryptocurrencies.

A wealth manager worth their salt will be able to advise appropriately and not only demonstrate modern ‘street cred’ by being familiar with these investments, but also the credibility that comes from having been around the block, armed with the scars of dotcom crashes, financial crises and the like – events Gen Z will have not experienced.

Proactive investment recommendations tailored to Gen Z can go some way to alleviate this problem.

An adviser that can explain the process of screening 1,000 gaming companies, where Gen Z are prominent consumers, and narrowing that down to a top three will undoubtedly have a customer that is more engaged.

Tech expectations

But wealth managers also need to get to grips with delivering advice – and this will be bespoke advice for wealthier Gen Zs – to a generation that demands cutting edge technology, and simply does not want as much face-to-face interaction as older generations.

Gen Zs will certainly want to meet their wealth manager and have access to them when needed, but they are totally comfortable with, and actually prefer, most communications being through electronic means.

Adapting will require the appropriate use of text messaging, email, or video conferencing through tools such as Skype or Zoom. Geographical culture also needs to be catered for – our interactions with many younger Chinese clients are conducted through WeChat.

Exposure to the latest technology has also dramatically raised service level expectations.

Gen Zs will not be forgiving on wealth managers that lag on the technology front.

If challenger banks can open an account in minutes and have no requirement to swap paper documents in a KYC process (using e-signatures, scanned identification and so on), surely wealth managers can too?

And why should Gen Z not demand simple, uncluttered, mentally untaxing interfaces on mobile devices? These technologies have moved beyond a nice-to-have and have become a must-have.

That is just the situation today. And while we say with a level of confidence that there will still be a need for an adviser/Gen Z relationship in 10 years, what we cannot say with confidence is exactly what that will look like.

With technology advancing so quickly, Gen Z being so willing and confident to adopt it, and building their investing knowledge and street-smarts all the time, the relationship will undoubtedly be radically different to the one advisers have with those in their 30s today.

Nick McCall is head of wealth management and Olexandr Skoryk is an analyst at Dolfin