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Embrace innovation to attract next-gen investors

Advisers need to change their relationship with technology to keep pace with the changing preferences of younger clients

Nov 19, 2018 @ 1:47 pm

By Dani Fava

Millennials, generally defined as Americans born between 1980 and 2000, make up the largest demographic group among U.S. adults, and they are quickly becoming the wealthiest. Research from Deloitte estimates that the total net worth of this generation will double between 2015 and 2020, to as much as $24 trillion.

How can registered investment advisers attract this important demographic? No one has cracked the code yet on getting millennials interested in money and investing. But it starts with communication and technology.

(More: Betterment revamping adviser-facing dashboard)

Changing communications channels

Forget email and office visits. Millennials communicate using text, video chats and social media. They don't need, or want, in-person meetings to cultivate personal relationships. Even therapy is moving online. Asking a millennial to walk into an adviser's office is missing the mark.

And consider what is being communicated. Much of the information from the wealth management industry is retirement-focused, but for millennials, retirement is becoming an obsolete concept.

Instead of a traditional career path with a predictable trajectory of working and saving until age 65, the next generation likens itself to the startup boom and the gig economy. Millennials see multiple paths to success and have different visions for their careers.

They also have very different financial and investment expectations from those of previous generations. This generation is also very socially conscious: Recent research from TD Ameritrade found that 60% of millennials consider socially responsible investing important, compared with 36% of baby boomers who felt the same.

This means advisers should talk about financial planning in terms that millennials care about: life experiences and the ability to make a difference. Instead of hosting another retirement seminar, for example, consider recruiting a building crew for a Habitat for Humanity house.

Lastly, RIAs need to up their tech game. To be viable in the future, advisers have to adopt the technology that's available today.

(More: Want to attract millennial investors? Time to rethink AUM pricing)

Upgrade your tool kit with AI

New research from TD Ameritrade found that most investors today prefer a computer's ability to use data to make better investment recommendations over using a human adviser. Advisers can adapt by outsourcing functions like investment management to third-party money managers that use artificial intelligence, while the advisers focus on deepening client relationships.

Beyond the mechanics of building and managing portfolios, AI can transform how advisers work with clients and expand the business. For example, Facebook can help advisers isolate key similarities among current clients and use that data to identify and target the best new prospects. AI can even help craft the right message for each person.

It can also help curate content. Advisers can send clients articles they are interested in, a simple but powerful practice that can helps deepen client relationships but one that is largely ignored by the RIA community.

Adviser 2.0: The next generation

AI is just at its beginning stages. New tools are being developed that will incorporate voice- and facial-recognition software and augmented reality, or AR, into day-to-day operations.

Imagine the day when an adviser walks into the office in the morning and while getting coffee, asks the digital assistant if any clients made deposits into their accounts overnight, or whether there are any alerts. Advisers will know the first things they have to do that day before they even sit down at their desks.

(More: Morgan Stanley rolls out tech-friendly offices for brokers, bankers)

In the future, facial-recognition software, combined with augmented reality, will profoundly change adviser-client interactions. Advisers can have deeper, more meaningful conversations with their clients simply by donning a pair of glasses that receive computer-generated alerts on the lenses.

Machine learning will make it possible: Augmented reality devices such as eyeglasses will give real-time feedback on people's state of mind during conversations, or research the web for information related to the discussion at hand, so the adviser does not break the conversational stride.

Facial recognition could help guide conversations by reading a client's emotional response to a suggestion. Advisers could also receive reminders about topics discussed previously with each client, such as, "Ask Joe how he likes his new boat."

If RIAs want to stay competitive, they need to change their relationship with technology so it reflects the changing preferences of millennials. Technology offers advisers a critical bridge for building businesses that can keep pace with the ever-higher demands of the next generation.

(More: 6 myths about millennials that could harm adviser businesses)

Dani Fava is director of institutional product strategy and development at TD Ameritrade.

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