How Can Banks Better Engage Gen X and Y Investors?

As Gen X and Y begin to accumulate more wealth—and inherit it—they are forcing financial institutions to radically rethink how they deliver services and evolve their digital wealth management offerings. How can financial institutions engage Gen X and Y prospects, who are generally more conservative and less trusting of financial advisors than their baby boomer parents?

Envestnet® | Yodlee® recently sponsored a webinar with American Banker on learning to engage Gen X and Y investors. Moderated by contributing editor Mike Sisk, the webinar panel speakers included Peter Delano, Financial Services Practice Leader at CEB TowerGroup and John Bird, VP of Product Marketing at Envestnet | Yodlee.

The webinar panel discussion focused on how financial advisor firms can better understand these two generations; how they differ from Boomers in terms of trust and engagement; how to leverage technology to deliver a more meaningful experience; and how data insights can improve a financial advisory firm’s acquisition and retention strategy. Below are key insights:

Peter Delano kicked off by commenting that financial institutions are so focused on Boomers that sometimes the research into the next generations are limited. Financial institutions, he says, should begin to focus on wealth transfer, and how to keep these young new clients who come to the institution through inheritance and other means.

When Gen X and Y are getting older, reaching their 30s and 40s, getting married, having children, and buying homes and cars, their financial future is significantly changing. These major life events indicate when financial institutions can have the greatest impact on a person’s financial health and future. They need to think about the value of their advice and how they can earn the loyalty of their clients.

Some of the challenges financial institutions face in reaching Gen X and Y are things like low trust of the stock market and banks; the financial advisor is usually older than their new clients, and the younger advisors can’t (or don’t want to) relate to them. Robo-advisors are also beginning to emerge as technological alternatives to provide automated investment advice, which these tech-savvy generations have embraced.

Peter also noted that Gen X and Y share similar preferences for digital access and interaction, but that doesn’t eliminate the need for personal service and personal contact. In the end, success for financial institutions comes from tailoring, teaching, and motivating action through both personal and digital channels.

John Bird emphasized that enabling consumers with open and unfettered access to their financial data is at the center of the wealth management technology that Peter had alluded to. Without the ability to quickly, accurately, and securely deliver a holistic view of their client’s financial lives, advisors will not be able to scale their business and deliver the type of services that Gen X and Y are demanding in the digital arena.

Starting with this step can move clients forward from the self-service accounts they have now, to the larger, more personal hands-on accounts that might be in a financial advisor’s wheelhouse. In particular, financial advisors can leverage the data from Envestnet | Yodlee to deepen collaboration with investors and develop long-term investment strategies that make sense for their clients. They can also identify opportunities to increase assets under management from within their existing customer base.

According to Pew Research Center in April 2016, the number of Gen Y (75.4 million) already surpasses the Baby Boomer generation (74.9 million), and Gen X is projected to pass the Boomers by 2028. This means that the investor landscape is going to skew toward the younger generations. Financial advisors, banks, and financial institutions who want to earn these two generations as clients – and survive the loss of their current shrinking client base – need to learn how to reach Gen X and Y on their clients’ terms, not their own.

To learn more, register for this on-demand webinar to hear experts discuss the trends and insights surrounding the next generation of investors and how they differ from a trust, technology, and engagement perspective.