Gen Z: bridging the advice gap with digital solutions

Richard Wake, Chief Customer Officer, UK and Australia, intelliflo

We all know that not enough consumers are seeking financial advice – just 9% have paid for advice in the last two years according to the lang cat’s Advice Gap 2024 report, down from 11% in 2023. Those who do take advice tend to be older and already wealthy: our Advice Map of Britain report, which analyses more than three million client records within intelliflo office, shows that nearly half of those who receive advice are between 50 and 60. Encouraging more people, especially young people, to take regulated advice is vital to improving the UK’s overall long-term financial resilience, as well protecting the long-term success of the advice profession.

The widening advice gap

Despite making up 20% of UK residents, Gen Z, which broadly covers teenagers and twenty-somethings, barely features in the advised population. Our data tells us that just 4% of under 30s are receiving advice. And it seems this generation is becoming even less attractive to advisers. The lang cat’s advice gap research found that the number of firms turning away less wealthy clients or only serving them under strict conditions had increased versus 2023, while those with a specific proposition for those with fewer assets had fallen. The consultancy suggests the year on year change was likely due to the impact of Consumer Duty.

Yet there’s no doubt that Gen Z would benefit from access to advice. Young people are facing huge financial stresses – high student debt, an uncertain job market, surging rents and property prices, the cost of living crisis – the list goes on.

Although it’s understandable that firms want to focus on their traditional client base, I’d argue that the importance of younger people to the future of advice firms shouldn’t be overlooked. Gen Z are the mass affluent individuals of the future, not least because the significant sums of money expected to transfer between generations in the next two decades.

abrdn estimates that £5.5 trillion worth of assets in the UK will move within families by 2050. Nurturing younger clients as they accumulate wealth will help build loyal long-term relationships, which will be crucial to future success given that 63% of advisers have concerns about losing business as wealth is passed down the generations according to research by Schroders.

Appealing to Gen Z

So how can the advice profession support young people into saving and investing and build lasting relationships with the wealthy individuals of the future, in a way that is cost effective and compliant? I think the solution must be in harnessing digital technology. Gen Z is the first generation of true digital natives, growing up with technology at their fingertips that would have been in the pages of a sci-fi novel when many of today’s advisers were growing up.

For advice businesses, using the right digital technology to reach people who are already wholly receptive to it brings multiple advantages. Tech-savvy clients who are willing to complete online fact finds and communicate through client portals reduce the administrative burden on the firm and so cost less per client to bring onboard and manage on an ongoing basis. Embedding digitally-enabled client service throughout the advice journey, especially for those with simpler needs at the outset, makes it easier to deliver a profitable service to more people who are still building their wealth.

However, the digital-first mindset also sets certain expectations. The under 30s are used to accessing information on demand and have grown up expecting tech to be engaging, user-friendly and quick. They want accessibility and transparency from their providers as well as prioritising ethical considerations – a study by DeVere Group found that 73% of Gen Z and Millennials prefer ESG investments.

Appealing to this demographic therefore means deploying the right tools, from mobile apps and client portals to AI-driven functionality, to provide access to information, guidance and even digital advice at any time and any location. Offering personalised options, like adjustable cashflow modelling projections and explanatory videos that can be explored at home, creating an authentic online presence on social media sites like YouTube, Tik Tok, Reddit and Instagram can all help reach younger audiences and build trust, relevance and engagement.

Combining digital and human

While the quality of the online experience is vital, it is important not to forget the value of human advisers in the process. Gen Z are more able to combine the digital and physical world than any other generation; while 97.5% of the group cite social media as their primary source of shopping ideas according to Influencer Marketing Factory, research by outdoor advertising company Clear Channel finds that 59% prefer to actually shop in store [6]. Getting the right balance between digital offering and human support is crucial for a Gen Z strategy that is successful for the demographic as well as your business.

There’s no stopping the digitalisation of advice services. An abundance of new tools and applications will be coming on stream imminently. Now’s the time to look closely at serving Gen Z the way they can buy into – it makes great business sense as well as helping to narrow the advice gap.

This article was first published on the FT Adviser on 25 October. You can find the original copy here.