Will traditional investment firms survive the next generation of investors?

Younger investors are increasingly exploring cryptocurrencies, fractional shares, and alternative investments, but David Mabie, Partner at Chicago Capital, doesn't think these trends fundamentally change diversification strategies.  

"Younger folks tend to have a higher appetite for risk," Mabie says. "So, I don't think it really changes anything about diversification. However, if clients tell you what they're looking for, you need to pay attention and try to help them get what they want." 

Mabie views risk-taking as a normal part of the aging process rather than a distinct generational trait. Young people naturally have fewer responsibilities, allowing for greater financial risks. However, as life progresses and financial responsibilities increase, investors tend to scale back their risks. 

"When you're younger, you tend to be more aggressive," Mabie explains. "Most people have children, start a family, buy a house—and often bite off more than they can chew. This naturally scales back your risk because you've taken on higher risk elsewhere." 

Despite this typical progression, Mabie highlights how today's investment landscape provides younger investors access to newer investment forms, such as cryptocurrencies. 

"Crypto resembles gold in many ways, a non-sovereign store of wealth," Mabie points out. "Speculation in non-sovereign vehicles is nothing new." 

Improved security measures, particularly custodial services, have made cryptocurrencies more attractive and accessible. "Storage of gold has always been difficult, and crypto has similar challenges," Mabie says. "Now, having custodians safely keep your crypto makes it safer and more mainstream." 

Engaging the next generation 

Mabie emphasizes the importance of legacy firms updating their engagement strategies to resonate with younger, tech-savvy investors. He advises involving younger investors early, respecting privacy rules, and encouraging open dialogue between generations. 

"Our approach is to actively suggest parents involve their kids early," Mabie says. "Good privacy rules mean you can't share information without permission, and as long as everyone understands that, it works pretty well." 

He recognizes younger investors' desire for independence and risk-taking. "Kids normally want space from their parents," Mabie adds. "They want freedom to make their own mistakes and investments." 

In an era of fintech apps and robo-advisors, Mabie believes there remains a strong demand for human financial advisors, though technological adaptations in client engagement and service delivery are crucial. 

"The real key is communication and information delivery rather than just the investments themselves," Mabie says. "People trust and rely on other people." 

However, firms must adapt technologically to stay relevant. "Information delivery and client interface absolutely need to keep pace with technology," he explains. "Younger folks expect real-time account access, want to trade online, and often prefer to communicate via text rather than email. Firms must adapt to these preferences or risk losing market share." 

Adapting to Generational Shifts 

With a significant portion of Chicago Capital’s client base comprised of multi-generational families, Mabie sees substantial value in bridging generational divides through comprehensive financial planning. 

"We help parents with estate planning, tax management, and moving assets to their kids," Mabie explains. "We sit in the middle, helping each understand the other's perspective." 

Despite significant generational shifts, Mabie remains confident traditional investment firms will adapt rather than vanish. 

"I've seen a lot of change over my 30 years," Mabie concludes. "The pandemic highlighted people's resilience. Firms absolutely need to keep pace with evolving client demands, including faster response times and improved customer interfaces." 

^{Chicago Capital, LLC disclosure: The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. 
The estate planning services offered by Chicago Capital are general in nature and should not be construed as legal advice.  Always consult an attorney regarding your specific legal situation.
Cryptocurrency investing involves trading in highly volatile digital currencies, which are not backed by tangible assets or regulated by governments, and whose value is driven entirely by market supply and demand. These investments carry significant risks, including price volatility, hacking, regulatory uncertainty, and technical issues, and they lack the protections found in traditional financial markets.}