Technology has been a great enabler over the past year, but can be a double-edged sword when it comes to engaging younger generations in long-term financial planning.

Gathering at a virtual roundtable organised by PIMCO and Citywire as part of a series of regional events, advisers from the north of England discussed strategies to engage ‘generation tech’ in financial advice – not only in terms of management of their finances but as a potentially attractive career.

For Stephen Hughes, director and co-ounder of Five Wealth, technology can help advisers make compliance less onerous for clients and greatly enhance the service and delivery of financial advice.

‘We’re a compliance-led industry and have been for many years,’ he says. ‘All the advisers here have probably apologised to clients in the past for the amount of paper we’ve thrown at them, or the obstacles we seem to present to doing business and to getting on with things.

‘Now we have the one-click Amazon world, with one thumb print you have access. We’ve had to come a long way and the providers, particularly, are oil tankers and take a bit longer to turn, but lockdown has helped with that and we’ve progressed.’

Digital onboarding, client portals and the ‘tech stack’ firms now enable advisers to interact with younger people quicker and more easily. On the flipside, technology can create a cacophony of noise and alter client behaviour.

‘We have to be careful that we don’t become a slave to notifications and this noise that’s out there 24/7,’ says Hughes.

Joseph McCurdy, a vice president at PIMCO, agrees that technology can yield big benefits but is also conscious of it acting as a catalyst for a growing culture of short-termism.

‘Holistic financial planning is not about short-termism,’ he says. ‘Holistic financial planning and long-term investment planning is about putting plans in place for three, five, 10 or 15 years, depending on the investment objective. Sometimes, having that information at your fingertips on a day-to-day basis can instigate wrong decisions from clients or make them think things aren’t going their way when, long-term, they actually are.’

Enhanced experience

Kusal Ariyawansa, branch principal at Appleton Gerrard, recalls an experience many years ago as an appointed representative of a network undertaking complex annual pension allowance planning.

‘I was struggling to explain to compliance about how I deliver this and I said: “I think the best way to do this is if I do a short video clip. That will be my suitability report.” The answer was, no, you can’t do that,’ he recounts.

For him, using technology to improve the client experience, not necessarily to provide real-time information, enhances advice and the value of it.

In illustrating how technology can make life easier for the end user, he highlights recent developments in the healthcare profession. His doctors’ surgery has an app through which he can order repeat prescriptions. These are submitted to a local pharmacy, which texts him when his medication is available for collection. ‘That’s made my life much easier,’ he says.

Technology can be harnessed in the advice sector to create efficiencies and reach a wider audience base – breaking down both geographical and generational barriers.

Tim Latham, a chartered financial planner at Equilibrium, gives the example of a client couple based in the north-west of England who want to introduce their child, living and working in London, to their financial adviser.

‘The best part is you’re not stuck to a geographic region anymore – by having a Zoom conference call you got rid of that barrier,’ he says.

He sees younger clients as preferring faster, more regular updates at their convenience as opposed to the traditional model of annual reviews that last an hour or 90 minutes.

‘Things need to be a bit quicker nowadays – in reality, it could be a 20 or 30-minute catch-up on the fly by a video call. If you’re just doing technology for the sake of it, you end up frustrating people a lot more than doing any good. But it can help improve the service for them, then it will work.’

Serious results

Younger people often do not yet require a full advisory service, so how are advisers approaching the delivery of financial advice to younger generations?

Five Wealth is using a subscription model. ‘They pay us a monthly fee and that’s effectively plugging them into us and some form of ongoing service,’ says Hughes. ‘We have to be smart about how we deliver that and that’s where the tech can give us efficiencies. Then at some point, they can graduate from incubators or slow germination clients into paying more commercial charging structures. It allows us to engage early and to work on that journey with them because there’s no point waiting until somebody has X assets under management before you start that process. We lose a big cohort and we miss out on engaging with people at a younger age if we wait.’

Latham agrees that a subscription service appears to be the way forward for what he terms ‘Henry’ clients – ‘high earners, not rich yet’.

He points to the payment of subscription fees appearing somewhat counterintuitive to those early in the accumulation phase. For them, the general advice is to save as much as possible.

How can younger clients balance the approach – the fee they pay versus the amount they are able to save? Latham draws an analogy with a gym membership: you could pay £20 a month for the gym and devise your own training programme or £80 a month for a personal trainer who helps you achieve the results you want.

Although most younger people do not have complex financial planning needs, Ariyawansa says they do need a results-driven strategy. Many younger clients who come to him ‘haven’t got any idea of saving’ and need guidance on how to build a nest egg.

‘I’m glad the gym analogy was used. I’ve been going to the gym for years and I really sweat it out in the sauna and there was no change in my physique – I didn’t become an Arnold Schwarzenegger,’ he quips. ‘I was tempted once to buy the services of a personal trainer and, I kid you not, the guy made me work and there were serious results there.’

Life changers

Education is another great facilitator in reaching younger generations. For Anita Wright, a financial adviser at Bolton James, the answer is to educate existing clients – their parents.

‘We know that most millennials will go to their parents for financial advice, rather than any institution, the bank or even ask their friends,’ she says. ‘So, if we can equip parents to advise their children better and to have faith in financial services, then they can see the value and we can reap the benefits.’

Appleton Gerrard offers complimentary financial planning to clients’ children aged 30 and under, and Five Wealth stages seminars for the offspring of clients.

Ariyawansa and Hughes are also ‘education champions’, helping to educate school-aged children. A regional chair for the Personal Finance Society, Ariyawansa has been encouraged by how inspired youngsters seem by the real-life case studies he has shared.

Such stories not only help to prepare them for managing their future finances but enhance the reputation of the advice profession and promote it as an attractive career. While young people might migrate towards accountancy or law as desirable professions, their interest is often piqued when they understand the real role of a financial adviser.

‘We are life changers – let’s put it that way,’ says Ariyawansa. ‘All we have to do is spread that message. The more youngsters who hear about this, when they see the outcomes, the more who will want to join.’

Hughes agrees that many youngsters do not have an accurate perception of financial advisers but from his experience there is no negative preconception either.

‘The thing I’ve found going into schools is that there’s just a lack of awareness of what we do. I’ll go in and they’ll say, “You’re an accountant, are you?”

‘It sometimes feels as though we’re starting out as a profession and making people aware of what we do. But don’t actually think there’s a preconception that what we do is the mis-selling of past days.’

Wider conversation

The last year has been littered with examples of irrational retail investor behaviour, often fuelled by social media hype. As workers were confined to their homes, investors sent the wrong Zoom rocketing when they piled into tiny Chinese company Zoom Technologies instead of America’s Zoom Video Communications. Frenzied buying of cryptocurrencies sent them soaring – then falling. And online day traders on WallStreetBets, an anarchic community of more than 4.5 million members of the social media platform Reddit, trigger a dramatic ‘short squeeze’ in high-street video games retailer GameStop.

Should advisers be concerned? Wright has two clients who ‘dabble in stocks and crypto’. She is unperturbed. ‘They are prepared to lose it because they have a fantastic financial plan in the background and it’s okay for them to do it,’ she says.

‘I wouldn’t condemn them if they lost money, but those young people that haven’t got a clue about tax efficiency or about ‘slow and steady wins the race’. They try to make a quick gain, but they can’t afford losses – that’s the bottom line.’

Hughes was contacted by a client a week earlier who had got drunk with a friend, invested £10,000 in cryptocurrency and it had grown to £50,000. ‘He said, “What’s this crypto all about? What the hell do I do?” They’re strange conversations and I think the big thing we must do as financial planners is demarcate and educate in terms of what is speculation, trading and “play” money that you can afford to lose versus what is long-term, sustainable financial planning and investing. That’s our role here,’ says Hughes.

McCurdy points to a positive, however – the interest that such buying frenzies generate in investment.

‘I’m all for people taking an interest in investments regardless of where it comes from,’ he says. ‘This opens up a much wider conversation because financial education around investments is really quite important.

‘Cryptocurrencies, I view in the same way as tech stocks of the early 2000s. I think they will still be here in 20 years’ time, but they’ll be in a slightly different format and they’ll be much more stable.’

Demographic shift

While there is significant room for improvement in the signposting of financial advice as a career to young people, the pathways are largely available for those who want to take them.

Wright started as an administrator and worked her way up, though she concedes she hit glass ceilings on route to becoming a financial adviser.

Five Wealth reckons the demographic is shifting. Four of its advisers have come through the ranks, all of them around 30 years old and three of them women.

‘I’m quite positive and enthused by the next generations coming through and the accessibility of adviser status within our industry,’ says Hughes.

‘I also think those coming into the industry are coming in with a different belief and mindset and are more evangelical about financial planning. It’s not your old commission days, it’s not Lautro, it’s not insurance-based sales.’

Youngsters that Ariyawansa is mentoring are increasingly focusing on the real value of financial planning and the extra they can add through tax planning.

‘They are moving away from investment management and realising that actually, if you focus on the fundamentals, markets will reward the risks taken over time.’