Staffing & Culture | 04.05.23
Time to Go Back to School: Understanding the Next Generation of Investors
by: BISA Staff
Tim Kehrer of the Kehrer Group and Larry Cohen of RFI Global led a session at the BISA 2023 Annual Convention showcasing MacroMonitor research that quantifies what investors of different generations want.
The MacroMonitor, a biennial, nationally representative sample survey, asked participants many pages of questions. The Kehrer Group, via RFI Global, ultimately analyzed 4254 replies, a number that excludes responses they couldn’t use. At the convention, Tim and Larry presented the results by grouping session attendees into two teams that competed to guess how different generations answered questions.
Three generations were the main focus of the session — those under 40 (the “next generation”), those with a head of household between 40 - 65, and those with a head of household who is over 65. 47% of investors are between 40 - 65 years old.
Here are some of the key findings:
Next-generation investors are keeping more of their money at banks and credit unions. Tim and Larry explained this could be due to the convenience of it — or because they don’t have as much money to keep track of as those from older generations.
One way to define millennials is that they don’t recall a time before the internet, while Generation Z doesn’t remember a time before smartphones. As expected, this means both generations (mostly under 40) are more prone to conducting their affairs virtually.
Even 64.7% of survey respondents over 65 said they’re comfortable online.
Tim and Larry pointed out that although people prefer to conduct affairs virtually, typically they want to deal with a real voice when they get angry!
One fact that surprised the room at the convention was the percentage of next-generation investors who prefer to text than call — 56.4% of those under 40 prefer to avoid talking to financial institution personnel, but that’s true of only 32.5% of those over 65.
A large majority of survey respondents said they want to keep their financial affairs uncomplicated, although the percentage who agreed with this was actually lower for those under 40. However, consumers don’t think the current way financial affairs are set up has made things easy enough.
A majority of those surveyed also prefer to do business with a single financial service company. Tim and Larry discussed how difficult this is in the current environment and, although there have been many attempts to cross-sell or bundle through a financial “supermarket,” it hasn’t yet been successfully accomplished. They commented on how this has created a cost born largely by the consumer, who often must manage 15 to 20 relationships.
Especially since the pandemic, people are wanting their lives to be less complicated. Perhaps it has put us back in a world where we want to bundle everything — something depositories stand to benefit from.
Preparing for retirement is one of many goals of the next generation. This is another fact that surprised the session room at the convention. Many thought the next-gen investor would rate preparing for retirement lower on their list of priorities compared to buying a home or other big life changes that often happen in the young-adult years. However, people of all generations rated it high, although the under-40 crowd rated other priorities similarly high.
Tim and Larry explained that your bank or credit union can serve many of the top priorities of the next generation. A young couple looking for their first mortgage can also talk to an advisor about saving for retirement.
30% of households now have a defined benefit plan. This correlates with unionization, Tim and Larry believe, which is picking up again. If you’re in a household with someone who has a DB plan, you’ll approach saving for retirement differently.
The next-gen investor is less likely to seek out a professional when making financial decisions – only 38.6% under 40 said they do, while that percentage is 57.4% of those over 65. Younger people are more likely to be skeptical about institutions and cynical about other people’s objectives, something the Kehrer Group is planning to research in more depth.
One session attendee suggested that the younger generation’s immediate thought may be to watch a YouTube video on how to do something, including investing. But these decisions are much more complicated, and an investor might not be aware of this until they make a mistake.
Tim and Larry highlighted how having an advisor is often less about choosing the investment but more about the important role an advisor plays as a coach — they can tell you if you’re about to make a bad decision.
The next generation is less willing to pay for financial advice, but the number isn’t terribly low. 42% under 40 said yes, they would, while that number was 56.4% for those between 40 - 65.
Some people were relatively confident about their financial decision-making ability. 55% of those under 40 were, while that number was 68.7% for those over 65.
When a next-gen investor visits your webpage or social media page, these are the topics the Kehrer Group found they are most likely to engage with:
- How to choose investments
- Minimizing income taxes
- Writing a will
- How to research investments close behind
Ensuring you have information on your website and social pages about these topics can help bring next-gen investors through your doors.
Are You Ready To Engage the Next Generation?
Some tendencies of the under-40 crowd exemplify traits many display when young (i.e., less willingness to pay for financial advice) and may leave behind as they age. Other tendencies — such as a preference toward tech-centered communication — reflect our changing world. Tech will only increase in importance over the next decades, as next-gen investors become core investors. Is your company prepared to understand these investors and greet them with open doors (and apps)?