Meeting younger investors where they are: Why gamification and TikTok are part of the strategy

Everyone in the wealth management industry knows about the  “great wealth transfer,” in which $84 trillion will shift from older generations to younger ones by 2045, according to Cerulli Associates.

Now wealth planners are confronting a major complication with that massive flow of money: Many people who will inherit wealth  tend to shy away from professional financial advice. Younger heirs are also digital natives — and they’re being targeted by an industry that is built on personal relationships but that doesn’t have a great track record of offering superior client-facing technology.

All of that means that the winners in the largest wealth transfer in history will be advisory firms that develop technology that can attract millennial and Generation Z investors and then offer a blend of technology and personal touch that show those clients results. That’s the take from Michelle Tran, head of enterprise sales and senior vice president at Vestwell, and Chip Castille, CEO and founder of GoalBased Investors, who dove into the topic at Financial Planning’s INVEST conference in June.

“They don't really know that they need financial advisors until they actually do,” Tran said of younger investors. “So how do you capture them at the moment when they do?” 

The first task, she said, is to ditch what she called the “misconception that they’re not interested” in financial planning. 

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”They just don't know that they're interested,” she argued. 

That’s where personalized technology comes into play, offering a tool to engage potential clients at their own interest points.

Unlearning the lingo
Castille said a big part of personalization – a buzzword of the wealth management industry — is realizing that younger investors have a lot going on, and don’t often have the time or interest in learning the finer details of an investment plan.

“The mistake that we make is, we try to ask our clients to understand our services using our own vocabulary, in our own terms,” Castille said. “It's a complicated subject. People have jobs, they're trying to be good at their jobs. Why are we asking him to do something that took us a long time to learn?”

Asking the right questions with the right words is key, Castille said. It’s an integral part of BlackRock’s iRetire program, which Castille was involved with when he worked there.

“We don't want to ask people to think about things like ‘how are you going to live?’ What a depressing way to start a sales conversation. ‘When are you going to die?’” Castille said. “And so what we said was, let's take insurance company practices and bring that into the problem.” 

That approach, he said, can lead to four essential questions: How much do you have today? How much can you save going forward? How much risk can you take? How long can you wait?’

With those questions, “we were using terms they understood,” Castille said. “We did not ask them to learn about how returns compound over 30 years. We didn't ask them to learn about mortality tables. We didn't ask them to learn about sequencing risk, all that other stuff.”

More than the bottom line
Younger investors are interested in not just how much money they can make, but how they make that money. The bottom line is important, but almost equally so is the idea that younger savers want their investments to do some good in the world — or at least as little harm as possible.

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“Millennials and Gen X are really focused on their values,” Tran said. “‘Does this organization align with my values?’ For a robo-advisor, are they offering customized impact investments? Are they offering ESG? There's just different priorities when you come to this generation, this age range. 

Garnering engagement
Sounds good — but such involvement can happen only after investors are engaged in some manner with a firm. One way to spark that relationship is through a bit of gamification.

The term has gotten negative coverage lately as the SEC cracks down on companies like Robinhood for the practice. But Tran said that’s the world we live in, where attention spans are shortening all the time as people deal with a deluge of information.

“You need to get people's attention,” Tran said. “We're just in a world where you flip your TikTok in 10 seconds if you're not interested.”

The key is using gamification to engage investors in a legal and responsible way.

“You see these credit cards that are focused on kids, Greenlight and GoHenry, and they all use the element of gamification, but they use it in a way to teach kids about investing to teach kids about money management,” Tran said. “We're all expecting some type of interaction where it's back and forth.”

Social media is a major part of the engagement. The key, Tran and Castille said, is getting out ahead of the so-called finfluencers who don’t always peddle factual information.

“Social media is table stakes at this point,” Tran said. “You have to be on TikTok. You have to be on Instagram. You have to be definitely on LinkedIn. And then for a lot of these bigger financial services firms, you just disclaim the hell out of it.”

Still, it may take some time before firms feel confident about having big social media presences  when there may be regulatory questions unanswered.

“I would expect the regulators to start issuing guidance on what's advice and what's not, and provide more clarity that will probably work against some of these people that are on the line and providing some advice,” Castille said. 

Once that happens, reputable advisors can work to attract those younger investors as they inherit fortunes.