State Street on how to target hybrid investors, women, Gen-X, Millennials

Rick Steves

“Our study identifies hybrid investors, women, Gen-X, and Millennials, as pivotal pathways for advisors looking to future-proof their business. By strategically integrating these high-growth investor groups into their client segmentation strategies, advisors can enhance their ability to attract and retain clients, gaining a distinct competitive advantage.”

State Street Global Advisors has published its 2024 Influential Investor Segment Study, an analysis of four investor groups demonstrating significant and enduring growth. These are hybrid investors, women, Gen-X, and Millennials.

The asset management business of State Street conducted the study to equip advisors with insights into the evolving needs and preferences of these high-potential segments, empowering them to position their practices for long-term success.

These are high-growth investor groups

Brie Williams, head of Practice Management at State Street Global Advisors, said: “Our study identifies hybrid investors, women, Gen-X, and Millennials, as pivotal pathways for advisors looking to future-proof their business. By strategically integrating these high-growth investor groups into their client segmentation strategies, advisors can enhance their ability to attract and retain clients, gaining a distinct competitive advantage.”

Three key themes emerged from the study across these investor cohorts:

  • a strong desire for collaborative relationships with advisors,
  • a heightened demand for modernized technology and tools,
  • and a clear expectation of competitive fees aligned with a compelling value proposition.

“Hybrid investors value financial autonomy, yet they also recognize the benefits of professional advice. While 67% collaborate with an advisor on investment decisions, they remain empowered to oversee a portion of their portfolio independently. This collaborative approach allows them to benefit from their advisor’s guidance and expertise while maintaining a sense of control over their investments. In fact, 49% cite the ability to control their investment decisions as a significant advantage of using self-direct accounts.”

“Millennials are transforming personal finance, prioritizing financial freedom and embracing innovative engagement solutions tailored to their preferences. With their tech-savvy and research-driven approach, they bring distinct expectations to the table. To remain relevant, advisors must adapt to this evolving landscape, leveraging customer experiences to meet the millennials’ needs,” said Williams.

“Women investors are leading the charge towards financial empowerment, yet many still strive for greater security. Their journey is not one of despair, but of resilience in navigating the unique challenges they face on the path to financial well-being,” said Williams. “With a focus on retirement and long-term planning, women investors are poised to seek advisors who prioritize strategies addressing longevity risks and retirement income solutions.”

State Street Global Advisors further entered into detail about each of these high-potential segments:

Hybrid investors

Hybrid Investors are a growing segment of investors who lean into the duality of personalized human advice and the convenience and cost-effectiveness of direct investing. Hybrids maintain a relationship with a traditional advisor alongside at least one self-directed account (self-service or robo platform).

Since they have a high degree of confidence in selecting their own investments, they also have a heightened awareness of how much they paid for them, and the long-term impact of investment fees on returns. High advisory fees are a hot-button topic for hybrid investors, especially given their ability to readily compare costs between managing their own portfolio and working with an advisor. This poses a risk for advisors with non-competitive fee structures.

The study revealed:

60% of hybrid investors compensate their advisors based on assets under management
45% indicate they would leave or switch financial advisors if those fees increased
43% state the cost savings of using self-directed accounts are a benefit
Significantly more hybrid investors (47%) than advised-only (27%) and self-directed only (37%) have ETFs in their portfolios, which tend to be lower cost and easier to trade
“Hybrid investors’ willingness to collaborate with an advisor only goes so far, as this cohort is quick to reconsider the relationship if they perceive subpar outcomes and higher fees,” added Williams.

Millennial Investors

Born between 1981 and 1996, millennials represent the fastest growing generation of investors, both in numbers and investable assets. Growing up alongside the internet, smart devices and social media, they navigate the digital landscape better than any generation prior.

Not surprisingly, 82% of millennials are hybrid or self-directed only investors, underscoring the significant influence of technology on their advisory preferences and financial decisions. They are also avid users of a range of self-service investing platforms. Nearly half of self-directed millennial investors rely on online tools and calculators for their investment decisions.

As millennials accumulate wealth and navigate increasingly complex financial needs, they become prime candidates for formal advisory relationships. Despite their historically high rates of direct provider platform use, 67% of advised millennials collaborate with their advisor on investment decisions. Additionally, advised millennials, more so than advised Gen X and Boomer segments, are more inclined to involve their advisor in day-to-day finances, including cash flow management, insurance, private banking, and debt management.

Generation X

Gen X has long been underserved in financial services, despite facing pressing needs for guidance. They stand at a crossroads, balancing retirement planning, wealth preservation, eldercare, and support for minor (and sometimes adult) children, making goal planning a complex task.

Interestingly, less than a third of advised Gen X investors received advanced planning services, and even fewer are coached in an effort to remain financially secure. Despite their attempts to manage it all, including their own investing, over 50% of Gen X investors surveyed are self-directed, lacking the tools, recommendations, or guidance they desire. In fact, more self-directed Gen X investors (41%) cite “no guidance or sounding board” as a shortcoming of self-service brokerage platforms, compared to 33% of millennials and 26% of Boomers.

What’s keeping them from engaging with an advisor? It comes down to fees and the overall experience. Despite their apparent need for professional investment guidance, the top reason cited for not working with an advisor is the perceived lack of value for the fees (45%). For Gen X investors who had previously worked with an advisor, it came down to increased costs (37%) and unfulfilled promises (20%) as the primary reasons for leaving, prompting them to turn to online services and investment websites for market and investment insight.

Women

Women are one of the fastest growing client segments due to the booming SHEconomy, managing over $10 trillion in total US household financial assets. With increasing financial influence and independence, women want to be even more engaged in their investment decision-making.

Interestingly, women in this survey were equally split between advised and self-directed investors, with 50% being self-directed and 50% being either advised-only (26%) or hybrid (24%).

Also notable was how thorough self-directed women are in their approach to decision-making. Among self-directed investors, women were much more likely than male investors to use online tools and calculators to aid in their investment decisions. They were also more likely than men to say that access to financial planning tools was a benefit of using self-service platforms.

When choosing an advisor, women’s preferences were somewhat similar to men’s. The overwhelming majority (69% vs. 63%) ranked an understanding of their financial goals and comfort with the advisor/client relationship (66% vs 62%) as the top two factors when selecting a financial professional.

Yet when it came down to credentials, women tended to be more choosy when it came to the factual attributes that make an advisor look good on paper. Factors they say are extremely important include:

Strong credentials/knowledge/performance (62% women vs. 52% men)
Worked with a well-respected firm (51% women vs. 48% men)
Referred from a trusted source (48% women vs. 40% men)
Advisors who make it past that scrutiny and prove their value are rewarded with loyalty. According to the study, 46% of women investors have been with their advisors for more than 10 years, compared to 36% of male investors.

Common Financial Goal: Retirement Security

Having enough money to live throughout their retirement years emerged to the top financial goals for each of these segments:

Hybrids: 76%
Millennials: 67%
Gen X: 79%
Women: 80%
It comes as no surprise that the majority sought an advisor’s help with retirement savings planning and retirement income planning, as these were among the top advisory services used.

Demographic changes, particularly in reshaping engagement standards, are setting expectations at a pace beyond traditional financial services. To achieve sustainable business growth, how an advisory practice adapts is crucial. “The findings from our study underscore the opportunity for advisors to embrace a growth mindset and tailor their services around investors’ preferences and objectives, rather than trying to fit clients into existing offerings,” said Williams. “Changes in consumer behavior are redefining expectations.”

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