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The headlines are understandably full of intrigue and speculation about the rising power and behavior of Gen Z. This generation has little to no memory of a world without smartphones; they rely on social media for everyday life. As the first group of truly digital natives, they represent the future and will be influencing the way we work and live.
Given the magnitude of the great wealth transfer underway, experts have been eager to predict this generation’s approach to money management and their impact on our financial world. As tempting as a predictive paradigm may be, trying to box Gen Z into a particular style of money management misses the point entirely. With access to financial information at their fingertips and the proclivity for doing their own research, the key to serving Gen Z within financial management will be to let them choose when, who and how advice should be delivered.
Gen Z is breaking the old model of seeking financial advice at a particular age or when a certain level of discretionary income is achieved. Gen Z wants to access financial advice and guidance at every point along their financial journey. Whether from a qualified financial advisor via phone, in-person or remotely, a self-directed financial platform or app, or even social media, Gen Z must be allowed to select what works best for their needs.
As financial institutions build their service platforms, it will be increasingly important to consider the best ways to connect with and support this generation as they make some of their biggest financial decisions.
When: Now and in their own order
Not likely to follow the same financial journey as their parents, Gen Zers will hit major financial milestones in a nonlinear fashion. For example, already, Gen Z is ahead of millennials and Gen X when it comes to homeownership, one of the biggest financial decisions a person will make. In 2022, 30% of 25-year-olds owned their home; according to Rocket Mortgage, over 71% of Gen Z plan to buy their first home in the next one to six years. And despite anticipation around the great wealth transfer, rising inflation and greater life expectancy will require Gen Z to take a different view on their own retirement planning.
Gen Z likes to be in control, overseeing the financial information and relationships they pursue. As digital natives, expect Gen Z to be one of the most informed consumer groups and investors we have ever seen, relying on social media and independent research before choosing whether they wish to engage a financial advisor. According to a CreditCards.com survey, Gen Z investors were nearly five times as likely to report that they get financial advice from social media, with 28% turning to friends and online influencers for guidance. Motley Fool reports that 91% of Gen Z used social media for information on investing, more than any other source of information.
As they choose the type of advice they wish to receive and the format they wish to receive it in, creating early connections is essential. Financial institutions and advisors must find opportunities to insert themselves into the process and provide these clients with actionable advice that builds on what they may be finding from other sources. Reaching this generation during their own critical information-gathering phase will not only help advisors validate the information Gen Z is finding online, but hopefully engage in well-timed, more in-depth conversation tailored to their questions and needs.
Who: Advisors are held in high esteem, but relatability is key
When it comes to delivery of financial advice, Gen Z is interested in building trusted relationships and receiving relatable information. According to a FINRA Investor Education Foundation report, Gen Z investors place financial professionals high on the trustworthy scale, second only to parents and family members (and a close second at that). To nurture and deepen relationships with Gen Z clients, financial advisors must focus on engendering trust with intention. To live up to this high esteem, advisors need to move away from product-led conversations and provide reliable financial wellness-focused education, advice framed around a client’s unique milestones, and continue to show up for the client as these needs organically arise.
As the most racially and ethnically diverse generation, Gen Z is looking to create relationships with financial advisors that have similar backgrounds and experiences. They understand that money matters are personal, and they expect financial advice to follow suit. In fact, Gen Zers surveyed for the FINRA report said that advisors who can explain things clearly, provide relevant information and share details of their own financial performance help boost trust levels significantly. For this reason, choosing a financial advisor will become a more sophisticated exercise for Gen Z. Already accustomed to using technology to forge social and romantic relationships, advisors should prepare to “be found” in new ways as technology continues to evolve.
How: Be flexible and personalize continuously
Financial advisors need to prepare themselves for a highly flexible world where Gen Z wants to self-serve, until they don’t. The traditional “one-size-fits-all” delivery model is not acceptable for savvy Gen Z audiences. Financial brands will benefit from models that let financial professionals identify and act on behavior triggers that signal advice, providing well-timed guidance.
As complex algorithms and AI are adopted by financial platforms, higher levels of personalization will be essential as Gen Z uncovers what best meets their needs. Some may not be looking for advice from financial professionals, preferring to self-educate or rely on friends, family or social media for information. Financial firms should structure their offering accordingly, providing clients with a platform that allows them to take control of their education, get formal advice, or experience a combination of the two. A Gen Z-ready financial platform will take the best technology and embed it into the user's experience, whether they are self-serving, sitting side-by-side with their advisor, or having virtual interactions.
As financial institutions compete for these future investors, control and choice must be the bedrock of any product, solution and platform. As much as firms are competing, they are also facing an increasingly outdated delivery model for financial advice. Making space for this generation to do it their way will quickly become one of the biggest assets today’s financial brands can possess.
Mike Sha is CEO and founder of SigFig.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
