Generation DAn emerging andimportant investorsegment

Page 2 | Generation D—An emerging and important investor segment

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Accenture Research

To gain a better understanding of theseemerging trends, Accenture held focusgroups in New York and Los Angeles,comprised of Boomers, Gen Xers and Millennials.3 To substantiate thequalitative focus group findings andachieve deeper insight into howemerging digital and social channelsinfluence relationships betweeninvestors and their financial advisors,Accenture conducted an online survey of 1,005 current and future investors.This quantitative research includedindividuals from across the agespectrum, including 501 Millennials, 251 members of Generation X, and 253 Boomers. The group contained aneven mix of men and women.

Requirements for participation includedat least weekly use of social media, inputinto household financial decisions, andeither current investment in financialproducts, or the intent to invest withinthe next three years.

Generation D An emerging—and important—investor segmentThe financial crash has led to a sea change in consumerattitudes toward investing, creating—unsurprisingly—a state of general distrust towards the financial community,especially banks and financial advisors.1 In a convergent trend,increased usage of digital/social channels in everyday life isspilling over into the relationships consumers have withfinancial institutions and those providing financial advice.

In late 2012, Accenture studied this shift and identified asignificant investor segment that is defined not by traditionaldemographics, but instead by their behaviors. This segment,which we have termed Generation D (Gen D) represents morethan 75 million people in the US, with nearly $27 trillion inassets.2 While it is not a homogenous group, we believe theirshared characteristics offer a path by which financial servicesproviders can better grasp how to find, attract and retain thesecustomers and their assets.

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Gen D members understand that investingis still a viable path toward creating,maintaining and passing along wealth.They also recognize their need for financialadvice along the way. They are less andless likely to view financial advisors astrusted resources for the information

2. Eroding Confidence in Financial Advisors (FAs)

The more than 75 million members ofGeneration D represent approximately44% of the US population. They alsorepresent nearly $27 trillion in assets.Today, Generation D is comprised of 26% Millennials, 48% Gen Xers and 25% Boomers. They are active investorswith higher levels of income, educationand assets, combined with a deeply digitallifestyle. For these always-connectedconsumers, technology—online, mobile,and social—is deeply woven into thefabric of their lives as they strive tocreate, maintain and pass along wealth.

Significant findings from our research are in three key areas:1. Generation D is a Vitally Important Group of Investors

Gen D members typically use multipledevices in a given week to managefinancial accounts, look up investmentinformation, and pay bills. Almost all areon Facebook, and most use social mediamore than once a day. Those who activelyseek investment information consult an average of four different investment-related websites.

Currently, Gen D Millennials have only a 5% share of the segment’s overallassets—but that balance will certainlychange over time. Some $30 trillion in

assets will shift from Baby Boomers totheir heirs over the next 20 to 30 years, andan improving economy will add to theirinvestable assets as well.4 Accordingly,40% of Millennial respondents said theyare “determined” to pass along wealth to their families, compared to 25% ofBaby Boomers and Gen Xers. In the years ahead, wealth managers and theirfinancial advisors will benefit most bydeveloping strategies for workingeffectively with this group and theleading edge of change they represent.

SkepticalMillennials

Skepticism toward financial advisors is most prevalent among the Gen DMillennials, who are also the most eagerto learn about investing and the mostdetermined to pass wealth on to theirfamilies. With a clear eye towardinvestment risks, they tend to seekinvestment information across multiplechannels and to validate the information or advice given to them using multiplesources. While 71% are currentlyinvesting, only 22% do so through anadvisor, and those relation ships arelargely transactional in nature.

Jaded Gen-Xers

Gen-Xers within Gen D are the leastconfident, most jaded and leastinterested in learning about investing.They are as likely to be self-directed asthey are to use a dedicated advisor,and nearly all are currently investing.Their use of social media—particularlyLinkedIn—and technology in general isless than the Millennials, but greaterthan the Boomers.

TrustingBoomers

Boomers still tend to enjoy a trusted andpersonal relationship with their financialadvisors even while they have becomecynical about the economy. They do notperceive the use of social/digital ascritical, but they understand this is wherethings are headed and want to keep up.As might be expected, they have thehighest incomes and net worth of thegroup, and 99% are current investors.

they need to invest wisely. For example,59% actively sought financial advicerecently—but only 40% looked to theirfinancial advisor for this advice.

There are definable differences in theattitudes toward financial advisors

between the three age cohorts ofGeneration D. Financial advisors whorecognize this and adapt their ownpractices accordingly will likely havegreater success in developing andmaintaining relationships with membersof each group.

28%

27%

33%

44%

43%

43%

14%

25%

30%

37%

42%

27%

7%

19%

27%

33%

38%

31%

Millennials (n=501) Gen X (n=251) Boomers (n=253)

“I would never take the advise of my financial advisor without first consulting another source.”

“I like to stay with what is tried and tested.”

“I seek comfort and predictability.”

“I spend a lot of time researching alternatives before making a major purchase decision.”

“I need to fully understand all the different options/outcomes before I feel in control of a situation.”

Identify as a Conservative investor

C

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3. Seeking information to mitigate risk

Gen D investors, Millennials in particular,display an increased need to make better and safer choices by personallyunderstanding the risks and benefitsinherent in different investment vehicles.

43% of Millennial respondents describedthemselves as “conservative” investors,compared with 31% of Boomer respondents.Millennials were also significantly morelikely than Baby Boomers to say they

prefer “tried and true” investment options(27% vs. 19%, respectively). 33% ofMillennials said they “seek comfort and predictability” in their investmentoptions (Chart 1).

While the crash has eroded theinvestor/advisor relationship among all investors, the need to independentlyvalidate investment information ratherthan trust financial advisors increases as

investor age decreases. As Chart 1 clearlyshows, 28% of Millennials will not take an FA’s advice without consultinganother source first.

Boomers are least risk-averse and mostlikely to trust their advisors. Only 7% say they would never rely solely on theirFA’s advice.

(continued on page 6)

Chart 1. Risk Avoidance issues(Data represent % Top Box, except for Investment Style)

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Interest in online services

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LNW Aggressive Millennials

HNW Aggressive X-ers

LNW Aggressive X-ers

LNW Moderate Millennials

HNW Moderate X-ers

HNW Aggressive Boomers

LNW Moderate X-ers

LNW Aggressive Boomers

LNW Conservative X-ers

LNW Conservative Millennials

LNW Moderate Boomers

HNW Moderate Boomers

HNW Conservative X-ers

HNW Conservative Boomers

LNW Conservative Boomers

3. Seeking information to mitigate risk

(contintued from page 5)

Over half of Gen D investors have soughtfinancial advice from an outside sourcein the past two years, including familyand friends, and social media contacts.They also utilize a range of online sourcesto help research financial decisions andkeep abreast of financial news.

While Boomers are still likely to trust theadvice they receive from their advisors,Gen Xers and Millennials are increasinglylooking for alternative and complimentarysources of information to help themaddress their financial objectives. 44%of Millennials described themselves as“extremely” interested in improving theirunderstanding of investing compared to38% of older respondents. Digital

resources will play a pivotal role that will only increase in the future. In our research, we tested a number ofpotential options to help understand the type of online resources that aremost attractive.

These included:

• online communities where investorscould interact with each other andfinancial professionals

• online video series and one-off videos

• online seminars or webinars

• virtual meetings with advisors

• investor-led online education

• connecting via social media, e.g. Facebook, Twitter, LinkedIn,Firm/Advisor Blogs, etc.

Core education services and virtualmeetings—tools that drive trust andcontrol—topped the list. As Chart 2illustrates, we found that the youngerand wealthier sub-segments ofGeneration D are most interested inutilizing digital tools—and that thoseinterested in these tools would likelyutilize multiple tools to serve their needfor investment intelligence. Also, themore aggressive the investment style,the more interested they were inleveraging digital resources.

Taken together, online education and FA interaction needs are highest among younger Gen D present and future wealth clients.

Chart 2. Online Education and FA Interaction Needs

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Gen D Represents a RealOpportunity for Wealth ManagersClearly Gen D investors—particularly the Millennials—representa large and viable market segment for financial services firms.However, a tandem Accenture study of the financialcommunity pointed to serious gaps in the strength of theirrelationships with these Gen D investors. Additionally, financialadvisors tend to overestimate investor knowledge, as well asmisunderstand their clients’ investment style, believing clientsmore aggressive and less risk averse than they really are.

The good news for financial services providers is that they canreach investors through online educational tools and resources.Those who are able to provide these resources can increaseinvestor confidence and faith, fostering stronger, stickier andmore trust-based relationships between advisors and investors.However, these online resources (including mobile) need to beseamlessly woven into the overall customer experience across all channels.

What Can Wealth and AssetManagers Do to Cultivate Gen DAccenture will share the findings from our research of thefinancial community in a report to be released soon, highlightingthe need for realignment of advisor attitudes and behaviors inorder to be responsive to the needs of Gen D investors.

In addition, our analysis shows there are three primary areas inwhich companies will need to evolve their businesses to addressthe needs and preferences of Gen D investors, including:

• Finding, attracting and retaining Generation D clients

• Evolving the customer experience to meet their expectations,behaviors and preferences

• Defining the new role of FAs and identifying new practices tohelp them remain relevant in the digital age

Look for our publications on these key topics early in 2013.

About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company, with morethan 246,000 people serving clientsin more than 120 countries.Combining unparalleled experience,comprehensive capabilities across allindustries and business functions,and extensive research on the world’smost successful companies,Accenture collaborates with clients tohelp them become high-performancebusinesses and governments. Thecompany generated net revenues ofUS$25.5 billion for the fiscal yearended Aug. 31, 2011. Its home pageis www.accenture.com.

Copyright ©2013 AccentureAll rights reserved.

Accenture, its logo, and HighPerformance Delivered aretrademarks of Accenture.

Notes1 Focus Groups conducted as part ofAccenture research project in New York Cityand Los Angeles in July 2012.

2 Population estimates and projections arethe product of publicly available populationestimates from the US Census (2011 data),Pew Research Center data from the PewInternet and American Life Project estimatesof the online population (2011-12), and theconditional incidence rates observed in thequantitative study. US Census data were usedto estimate the size of the population thatfalls within the Millennial, Gen X and Boomerage ranges. The resulting US populationestimate was multiplied by the midpoint of the proportional estimates of onlinehouseholds from both the US Census and thePew Research study to arrive at an estimateof the Online Millennial, Gen X and Boomerpopulation. The resulting figure was, in turn,multiplied by the conditional qualifyingincidence figures from Accenture's Gen DInvestor survey, which required respondentsto participate in or fully control financialdecision-making their households (whichdisproportionately affected Millennials),required incomes of no less than $30k forMillennials and $75k for Boomers and X-ers,and either some form of current investment(including 401k, any stock or bond) withoutregard for amount, or (for Millennials) a statedintent to begin investing in the next 3 years.

Asset projections were the product of medianself-reported total asset levels taken from thesurvey and the population estimates. Medianswere used to mitigate the impact of the very small, but disproportionately wealthyrespondents whose asset levels would haveskewed the projections upwards.

3 21-30 years old - Millennial candidate, 31-45 years old - Gen X candidate, 46-70 years old - Boomer candidate

4 Cerulli Associates: Cerulli QuantitativeUpdate - Retail Investor Product Usage 2011(based on data from Cerulli Associates, FederalReserve, Center for Disease Prevention andControl, Current Population Study, InternalRevenue Service)

ContactsAlex Pigliucci is the global leader for AccentureWealth and Asset Management Services.alex.pigliucci@accenture.com

Marc McCollum is the North America leadfor Sales & Distribution in Wealth and AssetManagement Services.marc.s.mccollum@accenture.com

Mark Newcomer is a Digital StrategyArchitect focusing on digital marketing and social media for Financial Services.mark.c.newcomer@accenture.com

About AccentureAccenture is a global management consulting,technology services and outsourcing company,with 257,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilities across all industries and business functions,and extensive research on the world’s most successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated netrevenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page iswww.accenture.com.

This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or furtherdetails on any matters referred to, please contact your Accenture representative. This document makes descriptive reference to trademarks that may be owned by others. The useof such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association betweenAccenture and the lawful owners of such trademarks.