Gen Z loves investing. But they don’t love financial planners.
Members of Generation Z (often defined as those born between 1997 and 2012) prefer to seek advice on social media, other websites, friends and family rather than going to advisors and brokers. Much more likely to look for investment tips. These are key findings provided in a report released Wednesday by the FINRA Foundation for Investor Education, an affiliate of the broker-dealer industry’s self-regulatory oversight body, and the CFA Institute, which administers the designation of certified financial analysts. is part of
their “Generation Z and Investing: Social Media, Cryptocurrencies, FOMO, and Family” The report surveyed 2,782 Gen Z (ages 18-25 at the time of the survey), Millennials (ages 26-41) and Generation X (ages 42-57) in November and December last year. This is a survey of data collected in Only about 30% of Gen Z investors seek investment advice from a financial planner, according to the survey. Instead, the sources they turned to far more often were social media (48%), internet searches and websites (47%), parents and family (45%), and friends (40%).
Young investors also showed a preference for investing in cryptocurrencies such as Bitcoin. Fifty-five percent of Gen Z surveyed said they invested in cryptocurrencies, as did 57 percent of millennials. About 4 out of 10 respondents in both groups said they had invested in individual stocks. Fewer than one out of three people bought ETFs, which track indexes such as the S&P 500 and are touted as low-cost diversification vehicles.
Half of Gen Z investor survey respondents said they invested out of fear of missing out on opportunities (FOMO). And 44% said their generation is facing greater financial difficulties than older generations.
Jack Heintzelman, a certified financial planner at Boston Wealth Strategies in Needham, Massachusetts, said advisors are partly to blame for young investors relying less on professional advice. rice field. Heintzelmann said it’s well known that Gen Z and millennials instinctively turn to the internet first when looking for information on a new topic.
But forums like Twitter, Reddit, and TikTok have far too few financial planners with good advice.
“We haven’t done enough to provide this information in a way that these people want to read,” Heintzelmann said. “And they see things as advice from real financial advisors, and they assume they have financial expertise.”
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Heintzelmann, 26, who sits on the edge of Gen Z and millennials, said many young clients don’t want to go to the same asset manager their parents go to. Much of that hesitation, he said, stems from the expectation that professionals, usually older, will be as comfortable and tech-savvy as they are.
“We’ve found that if you talk to them and show that you understand their thinking and understand where they’re coming from, they’re really willing to give you financial advice. said Heintzelmann.
Technology plays a huge role not only in how young investors learn about investing, but also in how they invest. Of her Gen Z respondents to the survey, 65% said they use investment apps. About 55% of millennials reported doing the same. However, only 38% of Gen Xers say they use apps.
They and millennials are much more likely to reach out to financial professionals, with about 35% of respondents in each group saying they would. In contrast, only 22% of Gen Z investors said the same.
Both bad and good
The FINRA Foundation and CFA Institute report wasn’t all bad news for financial planners. According to it, 24% of his respondents named advisors as one of their top three most trusted sources of investment information. Only her 27% of Gen Z respondents who cited parents and family as their most reliable source of information topped this result.
FINRA Foundation President Jerry Walsh noted that Gen Z often seeks information from social media, but that doesn’t mean they trust what they find there.
“In fact, people are twice as likely to say that financial professionals are the most authoritative source of information on financial topics, compared to social media,” Walsh said in an email. “When it comes to trust and financial information, Gen Z investors rank financial professionals second only to their parents and family members, coming in a close second.”
Nearly seven in 10 Gen Z investors, or 69%, said they were most likely to trust the advice of someone who “can explain things clearly.” Next in the ranking, 53% answered that they “trust information relevant to them.” More than half of them, 52%, said they trust advisors who share details of their financial performance.
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The report found that Gen Z investors are more likely to be male, slightly wealthier and more likely to have college degrees than non-investors. A There was almost no difference between races and ethnicities.
About 62% of Gen Z said their primary investment goal was to fund their travel and vacations. About 55% said they prioritized saving for spending, and 51% said they wanted to live comfortably in their old age.
Among Gen Z investors, 68% cited cost of living and inflation as the main barriers to achieving their financial goals, 43% cited economic and market conditions, and 38% cited employment and income.
Gen Z non-investors don’t invest because they have no savings (65%), live paycheck to paycheck (64%), and don’t know enough to be confident (56%). replied.
“If we want to lower the barriers to market entry, one of the key ways to do that would be to address this education need,” Walsh said.
The report also explored Gen Z investors in other countries. For example, her Gen Z in China tends to prefer mutual funds (54%), while her Gen Z in Canada finds cryptocurrencies far more appealing (57%). . Among her Gen Z investors in the UK, half of the respondents said they own cryptocurrencies and cryptocurrencies. Just over one in four said they own individual stocks.