According to a recent survey by Accenture, advisers earnestly overestimate the average investor’s knowledge of financial markets. The survey was conducted among 400 U.S. financial advisers, and an emerging investor population called Generation D (D for digital)—a diverse group spanning multiple demographics and representing more than 75 million people with $27 trillion in assets. The survey revealed that advisers believe 42 percent of investors are extremely knowledgeable about investing, while only 12 percent of investors regard themselves as very knowledgeable.
This creates a challenge and an opportunity for advisers. On hand, clients tend to regard advisers’ communication on investment topics and products as promotional and, most importantly, frequently well beyond their comprehension. On the other hand, it creates a unique and powerful opportunity for advisers to increase the frequency of client communication. This can be achieved by establishing consistent flow of communication focused on educational content, which will resonate with clients and help advisers address their fears and concerns about their investments.
The survey also revealed that advisers tend to misconstrue their clients’ risk tolerance, often assuming a threshold for risk higher than what clients can actually endure. This appears to be particularly true with millennials of generation D, a segment of the investor population with a pronounced lack of trust in the financial system (a consequence of the recent financial crisis) and a subsequent prudent and conservative attitude toward their investments.
Here too, the situation presents a great opportunity for advisers. According to the Accenture study, generation D is by far the most technology and social media savvy. This gives advisers an exceptional opportunity to tap this vast audience in a cost-effective manner by simply maximizing their use of digital tools and platforms. Because of this group’s predilection for digital communication, advisers will be able to provide increased investment education, and intensify the frequency and speed of client communication by using video messages, webinars, webcasts and online communities. This will ultimately help advisers to regain generation D trust.
Another notable finding of the Accenture survey has to do with advisers’ responsiveness. In one of my previous posts, What We Have Here Is an Enduring Failure to Communicate, I referred to a Spectrem Group study indicating that 73 percent of affluent investors would leave their adviser if he/she would not return their calls in a timely fashion. Fortunately, the Accenture survey reported that 59 percent of advisers recognize the ability of responding and addressing clients in a faster manner as one of the chief benefits of social media.
Other key results of the survey, included:
- More than 50 percent of advisers understand that social media plays an instrumental role in their successful interaction with generation D
- 40 percent of advisers landed new clients through Facebook, and 25 percent through LinkedIn
- 77 percent of advisers report that the use of social media helped them with client retention
- 74 percent report an increase in AUM, and 73 percent an overall increase in client interactions, due to their adoption of social media
The findings of Accenture survey unquestionably reiterate how rapidly advisers are embracing social media. The use of digital tools and social media platforms will undoubtedly continue to play an increasingly instrumental role in delivering the financial education that investors want and need. Ultimately, social media will empower advisers to stay relevant with their clients, built credibility and regain trust.
As always, questions and comments are welcome.
i-Impact Group Inc.