State Street Global Advisors has today released a research whitepaper, ‘Developing Financial Knowledge’, that looks at strategies for financial advisers looking to close the financial knowledge gap among investors.
One of the key findings was that most investors have an inflated view of their financial knowledge and at a time when individuals are more responsible for their own financial futures, there is an opportunity for advisers to close this gap.
This is particularly pronounced among the younger generation, who are increasingly being drawn to cheaper, online financial management offerings. And with trillions of dollars poised to transfer from the estates of Baby Boomers to their heirs over the next 30 years, advisers have a clear opportunity to educate the next generation of investors.
Please find below some key stats from the whitepaper as well some strategies and tools for advisers to effectively educate younger clients.
Key stats:
– 56% fear that their children do not have sufficient financial knowledge to handle the wealth they inherit
– Two- thirds want their financial adviser to engage directly with their children when it comes to financial education
– 62% want more information from their financial adviser about financially educating their children
– Only 4% of families have regular meetings to discuss money matters, whilst 45% never openly discuss wealth
– Only 29% of children retain the same adviser when they inherit
– The average financial literacy score of investors globally is 61%, yet nearly two-thirds of investors rate their financial knowledge as advanced
Strategies:
– Assign younger advisers to the next generation – some clients may feel uncomfortable broaching topics with their parents or their parents’ adviser
– Explain how advisers work – ensuring younger clients understand how to work with an adviser and proactively educating them on such issues such as adviser background checks and fees
– Don’t get technical too soon – keep technical terminology to a minimum in the beginning as younger clients new to the advisory process can get overwhelmed by too much information and speak in plain English
