That younger investors embrace online brokerages isn’t a surprise to anyone. But what is a surprise—at least to some—is that baby boomers are going digital in unexpected ways, forcing the financial community to keep up.
Virtual advisory firm Wealthfront built its system to connect with younger investors, the ones assumed to be the most comfortable with digital tools, with financial advisors. But something interesting happened along the way—boomers started signing up, too.
“Predominately our audience has been early adopters and younger professionals,” says Wealthfront chief operating officer Adam Nash. “But baby boomers are now making up over 10%, and that certainly wasn’t true at the beginning of the year.”
There’s a new reality sinking in across the industry. Once, digital tools were thought to be table stakes for doing business with young professionals. But the industry is realizing that older investors want them as well—and not giving it to them may mean losing clients, even the gray-hairs that have been in the practice for years.
Why are older investors flocking online? Nash’s theory is younger investors are now more influential in their parents’ decision-making. Word-of-mouth recommendations “seem to matter quite a bit to the older generation on who they decide to use,” he said.
That appears to be the case at San Francisco-based Personal Capital, where advisors do business using screen shares, chat and FaceTime to meet with new clients. But that technology interface hasn’t stopped boomers from joining up: More than half of the firm’s clients are 50 or older, according to the firm’s executive vice president Kyle Ryan.
What explains the rapid pick-up of tech tools among the older crowd? “The younger investor is usually an influencer towards their parents in terms of technology,” says Ryan by email.
The numbers dovetail findings by the Pew Research Center’s Internet & American Life Project that more than half of adults 65 and older are online today. They’re flocking to YouTube, social networks and shopping sites—while also growing more comfortable using banking and other financial services online. They form a surprisingly active demographic for Facebook, where 57% of those 50 to 64 are on the social network, according to Pew.
Michael Kitces, publisher of financial planning blog Nerd’s Eye View, has watched technology seep deeper into the advisory world. It doesn’t replace the advisor, he says, but it gives him or her a huge advantage over more traditional firms. Planners who bring technology into their practice are going to be better situated for success in the coming future with both boomers and their children alike, he says.
Conversely, if you don’t provide the tech tools that older investors now expect, they’ll go away, especially if they’re listening to their plugged-in kids.
“As the technology moves forward, there’s a serious risk to losing clients to more technology- sophisticated advisors,” he says. “It doesn’t mean the human goes away. But the technology-augmented planner will be drastically superior.”
Maintaining that personal connection may also explain the success of My New Financial Advisor with older investors. The site, which links investors with advisors, says more than 75% of its user base is over the age of 55, with about $850,000 in investable assets. CEO David Cantrell says that as more services move online or over the phone—especially “hi-touch” services like refinancing a mortgage—baby boomers, surprisingly, are eager to go online for financial advice.
“This was a trend I was surprised about,” he says of the sheer number of older investors coming to their site. “What’s interesting is the number of people who are comfortable talking to someone who is remote.”
And firms that shy away from using online tools in their services—thinking their retired clients just aren’t going to be interested in adopting them, or see them as an asset to the way they work with their advisors—may be in danger of seeing some of their wealthier clients start to peel away. And as their children sign with online brokerages—they may be able to persuade their parents to as well.
“We have retired people in Mississippi as clients, people in Florida, all over the country,” says Personal Capital’s Ryan. “And our interactions have been primarily online.”
