Younger Investors Back Off Advisers

Fewer than six in 10 investors of Generation X (57%) and Generation Y (59%) feel that their financial adviser is working in their best interest, according to Cogent Reports in its annual Investor Brandscape Study. The report examines investor attitudes toward investing, how investors make decisions, and their loyalty to advisers.

These ratings are in stark contrast to relatively older investors who report much higher levels of trust possible because of a longer working relationship and more focused attention from their advisers, according to Meredith Lloyd Rice, a senior director in the syndicated division at Cogent Reports.

Julia Johnston-Ketterer, senior director of investor-based products at Cogent Reports, tells PLANADVISER that the way to engage Gen Y is to give them more focused attention. “They’re very engaged and they are doing a lot of research online about their investments,” Johnston-Ketterer says. “They are hungry for information and advice, and firms help them process that information. I think they would really appreciate that.”

Not surprisingly, these younger investors also allocate the lowest proportion of their assets to a primary adviser, highlighting an opportunity for financial providers to bolster current advised relationships and potentially capture greater wallet share.

Members of Gen Y, born between the late 1970s and the early 2000s, have had a bumpy introduction to investing. They’ve seen historic stock market fluctuations in their forays into money management, and they have seen their parents weather some rough patches as they began facing their own retirement.

About a quarter of Gen Y investors (26%) say at least some wealth is inherited (compared with 17% of all affluent investors), the report finds, and they display a marked conservative approach to investing. Despite an uptick in financial well-being, investors in general have not adjusted their risk tolerance, but Gen Y seems particularly conservative, with 35% of their assets kept in low-risk investments. This is a similar allocation to that of second-wave Baby Boomers who are in their 20s, Rice points out.

“They have time on their side but they are afraid of losing what they’ve accumulated,” says Johnston-Ketterer. “They’re not investing enough, and they are really at risk of not meeting financial goals.”

Cogent conducted its online survey of more than 4,000,000 affluent investors with at least $100,000 in investable assets, not including real estate, between August and September.

A link to the findings is on Cogent’s website.