How advisors can use technology to seize their opportunity with Gen Z

As generational wealth transfers from older adults to younger people, and a wave of new investors emerge, it is increasingly vital for advisors to carefully consider their approach to engaging with clientele whose worldview greatly differs from that of their parents.

For advisors, who on average are 57 years old, getting on the same page as beneficiaries of their parents’ assets can be challenging. As such, many advisors are concerned about turnover in their client base — and rightfully so. One study from Ernst & Young has found that when assets change generations, firms typically lose between 70% and 80% of those assets.

Gen Z, the second-largest demographic in living history, is more tech-savvy than previous generations and most accustomed to using technology manage their daily finances. The National Association of Personal Financial Advisors reports that almost 40% of Americans under 65 receive their financial advice online or from social media, while only 17% primarily use a financial advisor. Armed with a bottomless well of information at their fingertips, 62% of today’s 18- to 24-year-olds are already investing, and 57% are using apps to do so.

At the same time, research from the CFA Institute and the Financial Industry Regulatory Authority Inc. finds younger investors lack the confidence, education and financial literacy needed to make their best financial decisions. With the eldest of Gen Zers only recently turning 24, many are just beginning their financial journeys and believe the challenges they face to be greater, and more complex, than generations before.

[More: Gen Zers aiming to retire earlier than boomers, study shows]

This means that despite the generational disconnect, there's still an opportunity for advisors to develop relationships with the next generation of investors and carve out a niche for their business. Success comes down to relationship-building, connecting with younger investors on their terms and activating empathy to get on the same page.

Thinking decades in advance may feel foreign or uncomfortable to younger investors, spoiled by the culture of now. But sometimes the answers investors need won’t come instantaneously or in the form of an app. Skilled advisors, known for their long-term focus and ability to think critically, can build trust and guide young clients by embracing best-in-class technology to deliver proactive education.

Additionally, publishing a regular cadence of resources – digestible insights, podcasts, etc. – can help investors maintain a realistic perspective of their financial health, which reportedly plays a major role in the fact that 25% of the members of Gen Z report feeling emotionally distressed. After weathering the economic turbulence of the recession and the Covid-19 pandemic, it's important for advisors to ensure an overall sense of calm with proactive communication.

It is also important to understand that while Gen Zers are concerned about their financial future, they are still eager to invest, particularly in companies that align with their values and have a positive impact on environmental, social and tech spheres. Advisors will benefit from staying current with trends relevant to this clientele and getting comfortable with investors’ involvement in managing their portfolios.

Generation Z may be more comfortable with technology, but fintech isn’t everything. Relationships matter, and developing and maintaining them is predicated on the ability to connect. Financial advisors who excel at relationship-building incorporate strategies that balance being human and a professional into every step of their sales and service processes.

As Gen Z inherits economic power, meaningful guidance will be important. Advisors, equipped with the right technology and willingness to adapt, can bring younger clients into the fold using comprehensive conversation. After all, the need for mentorship and coaching is core to human nature.

Lincoln Ross is CEO and president of CircleBlack Inc.