Where does the intermediary fit in all of this?

Being a generation of true digital natives, 63% of Gen Z would feel comfortable using a virtual assistant to manage their finances and insurance, according to a report by Target Group.

So, where does the intermediary fit in all of this? Anton Swanepoel, CFP® and Founder of Trusted Advisors and Kobus Kleyn, CFP® at Kainos Wealth Pty Ltd about the challenges and opportunities when it comes to this target market.

There is a place for the intermediary

Swanepoel’s immediate reaction to this was, “Good luck to any Gen Z if you think you can master all the complexities around financial needs, objectives, risks, tax, product features, terms, conditions, exclusions etc. through digital platforms. It takes full-time advisers and intermediaries years to master their craft and it is not as easy as it seems. But then I realised that it is fairly dangerous to ask a Baby Boomer to comment on what Gen Z would be comfortable with or not, simply because most of these comments will probably be based on my own assumptions, and as they say, “assumption is the mother of all flaws.” As a result, I have decided to obtain some insights from two Gen Z professionals, one who is a young CA, Richardt, and the other a CFP® with an Honours Degree in Business Management, Rochelle, and they both agreed that there are more than enough reasons why Gen Z clients will still use the services of intermediaries, despite having access to digital platforms. Although they may be tech savvy, and easily gain access to information and create an online profile on an investment platform, for example, these two Gen Z professionals have no doubt that there is a place for the intermediary.”

“I must admit that I was somewhat relieved that they confirmed my first thoughts on the matter. There may very well be no shortage of information, but it is overwhelming, and a qualified intermediary can be a tremendous help to process all the information, create context and provide perspective according to the client’s specific needs, objectives and risk profile. Selecting the right product in each client’s circumstances is not always that easy and it may be wrong to assume that Gen Z individuals only want to deal with ‘robots’. According to these two Gen Z professionals they still value human interaction and the expertise of experienced intermediaries when it comes to making important financial decisions,” added Swanepoel.

Trust in technology

“This is a new generation to me for now, as I am down to a client base of Millennials, Gen X and Baby Boomers,” said Kleyn. 

“Gen Z would be comfortable using a virtual assistant to manage their finances and insurance because they are digital natives. They are comfortable using technology to manage their lives. They also trust technology more than other generations,” said Kleyn. 

A study by Accenture found that 73% of Gen Z trust technology more than people to keep their personal information safe. They also believe that technology can make their lives easier. This trust in technology makes them comfortable using virtual assistants to manage their finances and insurance. 

“One way intermediaries can adapt to the preferences of Gen Z is by incorporating more technology into their practices. For example, they can use digital tools to communicate with Gen Z clients, and they can provide information and resources that can help their clients to make informed, basic financial decisions. In addition, intermediaries can use digital marketing and social media to reach and engage with this demographic. It is also worth noting that the preferences and expectations of Gen Z consumers may change over time and intermediaries will have to be adaptable and willing to evolve their practices to meet the needs of this demographic,” said Swanepoel.

The challenges

“The challenges and opportunities for financial advisers in the Gen Z target market are the same as when it comes to any other target market. The challenge is reaching them, but with personal branding and the power of social media, you can overcome this challenge over time,” added Kleyn. 

According to Richardt, building trust and credibility may be one of the biggest challenges for companies. “Gen Z has grown up in an era of economic uncertainty and many failed investment schemes, and many of them may be sceptical of traditional financial institutions.” Swanepoel said, “I cannot agree more, because trust is the key to any good relationship and lays the foundation for all transactions between all generations.” Richardt continued, “However, the medium through which financial services are rendered to Gen Z individuals may be slightly different and that is why it will be important to present your offering to Gen Z in a way that will instil trust, whether it is done through the intermediary alone, or whether it is done as a combination between a digital platform and the intermediary.”  

Rochelle pointed out that affordability to pay for advice may pose another challenge. She holds the view that any initial costs or planning fees may deter them from entering a business relationship. As young professionals, they may simply not be able to afford it. 

As far as opportunities are concerned, Richardt believes that financial services companies may need to adapt their offerings to meet the expectations of this demographic, such as by providing more digital options, low-cost and no-cost services, and more transparent and easy-to-understand product information. “In my view, Gen Z have less experience with financial matters than older generations and will need more education and resources in order to make informed financial decisions.” 

The opportunities

Kleyn believes “the opportunity is that they are comfortable using technology and trust it more than older generations. This makes them a target market that is receptive to virtual assistant services. The use of virtual assistants or robo-advice impacts financial advisers in the same way that it affects any other profession that relies on human interaction. It can impact their business positively or negatively. The positive is that it can free financial advisers to do more complex tasks requiring human interaction and emotional responses, which is impossible from virtual assistance or robo-advice. The negative is that it can reduce the need for financial advisers but never replace us as advisers.” 

Gen Z, Kleyn highlights, feel very positive still about human financial advice. A study by Deloitte found that 78% of Gen Z trust human advisers more than technology regarding their finances. They believe that human advisers can provide them with more personalised advice and emotional responses when needed most. 

“As a digital native generation, Gen Z is comfortable with technology and has high expectations for digital services. Financial services companies can capitalize on this by providing digital solutions, interfaces, and tools that are easy to use and accessible, such as online account management, mobile banking, and investment apps. Some Gen-Z clients will definitely use digital platforms without the assistance of intermediaries regarding simple transactions,” added Swanepoel.

“Gen Z may feel comfortable using a virtual assistant to manage their finances and insurance, and companies can leverage that by investing in virtual assistants, such as chatbots,” continued Swanepoel.

Gen Z, according to Swanepoel, prioritises personalisation and values services that are tailored to their individual needs. Companies that can provide personalised products and services, such as customised investment portfolios and financial plans, will have an advantage in targeting this demographic.

A final word to fellow intermediaries

Firstly, Swanepoel says, before developing strategies to attract Gen Z clients, it will serve you well to do your homework. “Making your own assumptions and building communication- and transaction strategies based on those assumptions may cost you dearly. Gen Z is a unique demographic with different expectations and preferences when it comes to financial services. From Richardt, we have learned that Gen-Z value technology and personalisation and may be sceptical of traditional financial institutions.”

“Secondly, building trust and credibility with Gen Z, like with all generations, is crucial and financial advisers can do this by applying the timeless principles of honesty, integrity, being objective and providing unbiased advice, being transparent, acting in their clients’ best interest, and being able to explain financial concepts in a plain and simple manner. If this can be done digitally, more Gen-Z clients will use it without the assistance of intermediaries. However, comprehensive, and complex planning will still require the assistance of experts. Thirdly, solutions must be cost-effective so that they will attract and retain Gen Z clients. Finally, it's important to remember that this demographic is still in the early stages of their financial journey and providing education and resources to help them develop good financial habits early on will ultimately be beneficial for both the clients and the advisers,” he concluded.

Kleyn concluded that the financial adviser can work with virtual assistants and robo-advice in a hybrid world to benefit both parties by providing them with the same level of service. “This can free up the financial adviser to do more complex tasks that require human interaction and emotional support. The financial adviser can also use robo-advice to provide their clients personalised advice. This can benefit the client by giving them access to more affordable advice. The adviser can use a hybrid advice model to scale their practice with robo-advice investment platforms for clients who do not always require financial needs analysis or complex advice and for smaller investments. To capture this new generation market, senior and older advisers must consider including Gen Z advisers as a succession into their practices.” 

Writer’s Thoughts

There is room for opportunity… Gen Z is comfortable using technology because they grew up with technology. Financial services companies can capitalise on this. But lets not forget that even though there is technology at their fingertips, Gen Z still values human interaction and the expertise of experienced intermediaries when it comes to making important financial decisions. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]

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