Mortgages. Student loans. Tax allowances. Investment strategies. Credit card debt. Pensions. Buy-now-pay-later offers. When you’re fresh out of college and starting a new chapter, the world of financial services can be a very confusing place. One where, despite years of education in other subjects, you still might have a lot to learn. A lack of financial literacy matters—especially in markets where individuals are solely responsible for their financial security¹. But it does not only just to those looking for guidance; it does also matter to the wealth management and investment advisors who hope to capture the attention of younger clients and to assist them with their financial needs throughout their lives.
Why engage with younger generations now?
Why is engaging with younger generations so important for wealth managers, and why now? Today, digital delivery and technologies like artificial intelligence (AI) are making it possible for firms to reach out beyond the traditional target market of High-Net-Worth Individuals (HNWIs) and also provide services cost-effectively to a growing number of mass affluent clients—not the least of which are the Millennials and Gen-Zs who could be tomorrow’s clients or might benefit from an intergenerational wealth transfer.
On the other hand, a potential lack of financial literacy means that the younger generations could make decisions in financial matters that might have negative long-term consequences. And that is not even taking into account todays massively changing macro-economic environment with rising inflation, higher interest rates and rising market volatility.
Wealth managers may be able to help with both aspects but there’s one big hurdle in the way: how to reach these Gen-Z’ers (and even some Millennials) when they aren’t looking, lingering or interacting in the same places as their parents did?
That’s a bit of the context behind the recent move of some wealth managers setting up accounts on social media, seeking to engage people in their 20s and even 30s with information and tips on their financial wellbeing. Commonly bracketed together sometimes as “FinTok”, these initiatives openly aim to improve financial literacy. As those generations become better informed, they may also become readier buyers of financial products and advice to build out their own wealth.
In terms of supporting an ongoing financial democratisation (meaning easier access to wealth management services), inclusion and understanding, it’s undeniable that the rise of FinTok is a positive step forward. But the jury is still out on how effective it could be in converting young eyeballs into true interest. To help explain why, let me tell you about some recent conversations I had with some people in their early twenties. True, those conversations are by far not a statistically representative sample of the Gen-Z population, but I think their views carry some weight.
Where’s the trust?
I began by asking what they thought of financial services companies offering tips on finances on social platforms. One replied: “It’s just another case of your generation telling our generation what to do.” Another expressed scepticism over the sites’ impartiality—commenting that “they’re really just trying to sell us something.” When I asked who they would trust for advice on financial issues, they mainly said podcasts, their friends, and the wider social community. Overall, they felt social media was a place for having fun and engaging with friends, but not for being sold to.
This exchange captures for me the underlying question for any FinTok approach and probably even beyond: while many young individuals may have an urgent need for financial education, they might not trust the people selling the financial products to provide it to them.
So, what could be a solution?
Spending some time thinking about potential solutions, one idea could be that wealth management companies could start teaming up with social media content creators that younger people already trust: building new relationships and leverage them to offer insights into finance and investments over social media. But this raises several potential issues. Some influencers have already hit trouble for failing to declare their commercial relationships with brands—and that’s when they were providing information on things like cosmetics rather than regulated investments. A closer look raises even more questions: The sponsorships would have to be disclosed—but wouldn’t that immediately undermine the audience’s trust? Where do you—or the regulators— draw the line between financial best-practice advice and investment advice? What kind of accreditation might the influencers need?
Another thought I had—which could also form part of any company’s efforts to help improve the employee experience and even help with employee retention—is to provide an impartial workplace services platform that offers their employees financial education. This could help to address any financial acumen gap, thus ensuring that new (and existing) employees have the basic financial foundations in place to be informed clients of financial services firms. These types of services are already being launched in some companies wishing to cater to holistic employee needs. Not having sponsorships and being impartial may address the critical question of trust. While here the jury is still out as well, this type of offering might have some great potential.
In closing
Make no mistake, I don´t have an immediate answer to the underlying question and I truly applaud financial services companies for reaching out to a new, younger potential client base on social media. Helping to educate people and improve financial literacy is an absolutely worthwhile and laudable aim, and it will be interesting to see how the recent launches fare in terms of attracting followers and getting traction. Maybe I’m wrong, and they’ll take off among the target audience.
But ultimately, I think closing the financial education gap can’t be left only to providers: it is a broader question as financial markets become more complex with new asset classes emerging and it has to also be down to our collective society to help this generation in need. To trust wealth managers—or any financial services firm—enough to buy their products, young people first have to understand what those products do. This means starting with education first.
I would very much love to hear your thoughts on the topic, so please feel free to reach out to me on LinkedIn to discuss.
