The extreme stock-market volatility resulting from the economic impact of COVID-19 has taken a toll on retail investors in recent months. That’s leading some younger Canadians who have invested their assets through a more hands-off approach to turn to financial advisors for guidance and direction.
Jordan Damiani, a 34-year- senior wealth advisor with Meridian Credit Union in St. Catharines, Ont., recently added a young, do-it-yourself (DIY) investor to his client roster for this very reason.
Mr. Damiani had first met the then prospective client in June 2019, but nothing came of the meeting. Then, in mid-March, the prospective client realized he needed an expert when the pandemic hit and markets tanked.
It was a good thing too. His DIY portfolio was in shambles, overweighted in certain sectors and countries. “Can you de-risk my portfolio?” he asked the advisor.
Mr. Damiani says he isn’t surprised he and some of his colleagues have seen more millennials turn to human advisors in recent months and away from discount brokerages or robo-advisors.
“When something goes wrong, the preference is always to speak to a live person,” he says.
In fact, advisors likely didn’t have to wait for stock markets to plummet to land younger clients. Despite having a reputation for being self-assured or even bullish when it comes to investing, a study from the CFA Institute and FINRA Investor Education Foundation in the U.S. published in October 2018 reveals that a majority of millennials lack confidence when it comes to financial decision-making.
Specifically, 58 per cent said they would prefer to work face to face with a financial professional. That figure is on par with older generations like baby boomers (60 per cent) and Generation Xers (58 per cent).
Kurt Rosentreter, senior financial advisor and portfolio manager at Manulife Securities Inc. in Toronto, says he’s seen a small uptick in young clients jumping from robo-advisors recently for that reason.
“I’m taking business away from robo-advisors because of their ‘relationship-in-a-can’ approach. At a minimum, [clients] want to talk to people and they don’t want to wait on hold,” he says.
Despite having fewer investible assets than older, established clients, there are still strong reasons for advisors to add millennials to their client rosters. They represent the largest demographic since baby boomers; and as aging clients pass away, a massive generational transfer of wealth between baby boomers and millennials looms in the not-too-distant future. Besides, you never know who a young client knows. Make them happy and they’ll be singing your praises for decades.
The problem is that not enough advisors are willing to make the leap and take these younger clients on, says Kathleen Daunt, a financial planner with the New School of Finance, a Toronto-based advice-only financial planning and coaching firm that deals primarily with clients under 40. It’s shortsighted, she says.
“Money makes money and that’s the tragedy of this world. The more you have, the better advice you’re going to get,” says Ms. Daunt, who at 33 years of age is a millennial herself.
Furthermore, she says she’s not surprised that so many members of her generation are drawn to robo-advisors because they require a small level of minimum assets to begin investing.
For advisors open to serving more millennials but who don’t know where to start, the trick is to play in their sandbox. That means taking to social media or offering online courses and videoconferencing sessions.
And one of the pandemic’s silver linings is that it has forced advisors who once felt trepidation with technology to become more comfortable using tools such as Zoom or Skype and hosting webinars.
But tweets, posts, blogs and videos are only the initial touchpoint. Mr. Rosentreter says that drawing DIY and robo-advisor clients to his firm is “a dance.” It can take some time and a thorough explanation about why working with a human advisor makes sense.
In many cases, prospective clients don’t realize that the fees they will pay for financial advice will give them a full financial plan that includes tax planning, debt management strategies, discussions about reaching life goals, real estate advice and help with insurance.
And as for millennials who still decide to go the DIY route or use a robo-advisor? Both Mr. Damiani and Ms. Daunt say that’s not necessarily a terrible thing because they gain investing experience before working with an advisor and creating a full financial plan.
“While you’re young and have a fairly straightforward financial picture, without the complications of home ownership or a family to support ... saving in an automated investment robo-advisor can suit your needs,” says Ms. Daunt, adding that not everyone needs personalized, tailored advice at the very beginning. Just getting into the habit of saving can be enough.