A digital age for all ages
Younger people lead the way with digital adoption, opening up opportunities to usher them into advice. But millennials and Gen Z aren’t the only demographic embracing new technology.How we engage young people with financial advice is a much-debated topic.
⟶ Research from the Financial Planning Association of Australia shows 81% of Generation Z and 76% of millennials would like to spend more time with a financial planner.
Yet, the intergenerational wealth divide has widened dramatically, with younger people’s wealth increasing at a much slower pace than that of older age groups, according to the Household, Income and Labour Dynamics in Australia, while 2019 data from ASIC shows that take-up of financial advice among Australians aged 18-34 years remains low, at 21% of the total of those who seek advice.
The low uptake of advice by younger people is not necessarily a fair reflection of their overall financial engagement, however.
⟶ According to the Australian Securities Exchange (ASX), about 46% of Australians now hold investments other than their primary residence or superannuation and the fastest growing demographic is millennials. Many have opted for direct shares or exchange traded funds (ETFs), cementing their place as the most accessible and widely used investment options.
In addition, new research from wholesale trading firm AUSIEX shows new female traders are much more likely to invest under the guidance of an adviser than their male counterparts, providing the opportunity for advisers to review and potentially tailor their business models to young, female investors.
Increased digital use across all demographics
Advisers are beginning to sense the opportunity presented by younger clients. Given that Millennials and Gen Z tend to be the most tech-savvy age groups, digital tools provide the obvious key to unlocking engagement with financial advice - and in fact, this is true of all customers.
While there is a demographic divide when it comes to digital adoption, it’s not as wide as you might think. A recent independent study by CouriersPlease revealed that the COVID-19 pandemic drove more Australians online.
⟶ What’s more, 64% of those under 30, 62% of those aged 31-50 and 43% of the over 50s are planning to shop more online going forward, demonstrating a digital shift across all age groups.
For advisers it is becoming increasingly important to ensure systems provide easy access to the information the client wants at whatever phase they are in their financial lives.
The traditional advice model continues to provide exceptional service to wealthy customers, clients with complex financial planning needs and those around retirement. Best use of technology has been proven to enhance efficiency and streamline administration to maximise the number of clients that can be managed while driving engagement. However, most advice firms find that it’s not cost-effective to extend this model out to less affluent groups.
Yet there is now a deliberate push in the Australian market to make advice more affordable and accessible to all and ASIC recently ran a consultation paper on this very issue, seeking feedback from the industry on the impediments to the delivery of good-quality affordable personal advice.
⟶ There is also evidence that advisers who engage with their clients’ children earlier in their financial journey - by providing more transactional services through digital portals, for example - have a greater chance of holding onto those clients when they eventually inherit their parents’ wealth.
For advisers seeking a broader range of clients, digitising elements of the advice process can help deliver an effective, affordable solution providing personalised, simplified advice. By finding ways to widen access to financial advice, we can help more people make better long-term decisions and achieve their personal and professional goals.
While younger people are clearly at the forefront of digital adoption, technology can help clients of all ages engage better with their finances. We need to ensure that the digital age of advice develops in ways that make it accessible and valuable to clients of all ages.