It’s the perennial issue for the advice industry – with the bulk of the country’s wealth moving down the generational ladder, how can advisers engage with younger Australians?
New research conducted by ING and Rice Warner aims to tackle this problem. The My Generation report surveyed over 2,000 Australians aged between 16 and 64 – from the newly-minted “generation Z” straight up to baby boomers – to determine how they approach their finances, to whom they turn for advice and how much they’re willing to pay for it.
It’s a comprehensive piece of research, but there are some key takeouts for those in the advice profession looking to court younger savers.
The good news? Trust is high …
Advisers were found to be the most trusted source for financial advice across all generations, but despite recent headlines, generations Y and Z (those aged between 16 and 38) held the most faith in the profession. Furthermore, while the report concedes “the importance of planning for retirement naturally escalates as it draws nearer,” 20.92% of generation Z respondents and 35.73% of those in gen Y said they were already planning for retirement.
On top of this, generations Y and Z believe they will need between roughly $1.6 million and $1.7 million in order to fund their retirement, but more than 40% of gen Y and more than 61% of gen Z don’t know where their super is invested. The report says “this suggests a high level of disengagement, given more than 70% of the total population has a super fund.”
What this disparity between engagement and faith in financial advice suggests is that there’s an untapped well of advice needs on which the industry can capitalise.
There’s a caveat, though.
… but cost expectations vary
For an annual face-to-face strategic plan, average fee expectations vary along generational lines. Generation Y respondents expected to pay an average of $316; generation Z expects to pay $394, with generation X expecting to pay even less at an average of $232. The report says this suggests younger Australians “show a greater propensity to pay more for advice than older generations, which could suggest a growing understanding about its cost and value.”
Complicating this, though, are the different expectations about how a client-adviser relationship should operate. While older Australians – generation X and baby boomers – wanted advice “to help them achieve their lifestyle, financial and retirement goals, and to boost investment returns,” their younger counterparts are prioritising cashflow and debt management.
Younger generations, the report adds, also value a “broader range of services” from their adviser, reflecting a financial coaching style of advice that “suggests the rise of a new type of mass advice model at play, at least partially supported through digital channels” and delivered monthly or even weekly. This contrasts with older Australians, who are more likely to make their visits on an ad-hoc basis.
Expanding on this, the report says that technology will play a “key role in helping advisers to meet this growing need by supplementing direct personal contact.” Suggested channels included online, over the phone and via Skype.
The point of sale is also different
As a final takeout, the report says that while older Australians “tend to see a financial adviser to generally stay on top of their finances, younger Australians tend to need a prompt for advice.” Likely prompts included a desire to buy property or start a family.
The report concludes that the desired structure and delivery of advice is influenced by generational factors. For younger Australians, these include an uncertain work environment, generally higher levels of debt and escalating property prices.
Understanding how the world looks to younger savers will be key to engaging with them.
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