What is the New Age Investors Mindset?
Investors and their investing patterns have evolved over the years. The thinking patterns, standards and expectations by the new generation of investors have changed significantly.
These new age investors think about advice differently from previous generations and expect to interact with their advisors in a different way.
“I’m Special”
Investors no longer want to be treated as part of a segment but instead as unique individuals with specific goals and preferences. They expect to receive advice tailored to their unique circumstances.
“I want to be in Control”
Likewise, they want to stay in control of their financial lives and understand the advice they receive and make the important decisions themselves.
“I will do it by myself”
They are reluctant to buy discretionary services and they are increasingly comfortable conducting their own research. They are into D-I-Y investing.
“I want it NOW”
They expect to be able to access advice anywhere and at any time, through multiple channels and devices as part of a rich digital experience.
“I will not trust easily”
The New age Investors are more skeptical of authority than previous generations of investors. They believe in the wisdom of their peers.They seek opinions and views from multiple sources of advice simultaneously from not only experts and financial advisors but also friends and colleagues.
“I hate risks!”
They view risk through a different lens: they perceive risk as downside, rather than volatility when it comes to giving firms money to manage. This has led advisors to emphasize capital markets and hedging strategies that seek capital protection more than traditional portfolio allocations that seek to manage risk through diversification.
“I’m not a second class investor”
The investors expect access to the same investment products and strategies available to Ultra High Net Worth Individuals (UHNIs) or even institutional investors. Therefore, wealth management firms have to introduce new ways to give their retail investors access to alternative investments and new asset classes beyond traditional fixed income and equities, as well as active strategies.
How Wealth Management firms should cater to them?
Wealth Management firms and their advisors should adjust their offerings and service delivery models to cater their needs and expectations such as:
Bespoke Solutions
Provide Investment advice and products to be tailored to individuals one at a time and provide holistic goal based advice. Firms should provide Access to same high yield assets & strategies once available only to wealthier investors.
Multi-channel Models
Access to multiple channels and several advisory models at the same time.
What-if Analysis
Advisors should factor multiple, divergent market scenarios into “What If” Analysis. This requires hard thinking as well as new levels of modesty, but is key to building and maintaining trust from investors.
Research
Firms should develop increasingly sophisticated research and modeling capabilities to support scenario analysis. The quality of research determines the quality of decisions being made.
Active management
Advisors will need to be proactive in reaching out to clients in times of volatility and proactively rebalance portfolios. Actively managed portfolios can thrive in the least efficient corners of the market.
Innovation
Firms will have to develop new product offerings for managing their clients’ cash and other short duration assets and support their value in real terms.
These re-wired investors are likely here to stay and their influence over the rest of the investor class is likely to increase. This is a time of significant change for the Wealth Management industry. New forms of advice and new ways to deliver that advice will continue to emerge. While retail investors will benefit from all the changes, Wealth Management firms such as UpperCrust Wealth are strategically evolving to adapt to these dynamics.
Shaily Pandya is a Chartered Wealth Manager who is an in-house researcher. She is a founding team member at UpperCrust Wealth. She extensively supports key management for bringing their ideas into practice.
