How can advisors unlock relationships with high-growth client segments?

Are hybrid investors, millennials, Gen Xers and women prime targets for advisors build new client relationships – or maybe event strengthen existing ones?

For advisors who know how to pay attention and tailor their strategies accordingly, the answer is a resounding “yes,” according to a new study from State Street Global Advisors.

Drawing from a survey of roughly 1,500 individual investors across the US, State Street’s 2024 Influential Investor Segment Study offers insights into how advisors can effectively engage with these groups by considering both traditional client interactions and modern technological options.

“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,” Brie Williams, head of practice management at State Street Global Advisors said in a statement.

The study found two-thirds of hybrid investors, who get advice and have at least one self-directed account, see a good tech platform as a prime consideration for choosing an advisor.

“While 67 percent collaborate with an advisor on investment decisions, they remain empowered to oversee a portion of their portfolio independently,” Williams said. “In fact, 49 percent cite the ability to control their investment decisions as a significant advantage of using self-direct accounts.”

While 60 percent of hybrid investors compensate their advisors based on AUM, 45 percent would consider switching advisors if their fees were to increase. Being more cost-conscious, a higher share of hybrid investors also use ETFs in their portfolios (47 percent) compared to advised-only (27 percent) and self-directed only investors (37 percent).

The study also found a significant a strong overlap between millennials, the most rapidly growing generation of investors, and self-directed investors. A robust 82 percent of Gen Y investors said they take a hybrid or self-directed approach.

In line with their digital predilections, nearly half of self-directed millennial investors rely on online tools and calculators for their investment decisions. Despite their preference for direct investment platforms, 67 percent of advised millennials collaborate with their advisors, indicating potential for deeper advisory relationships as their financial needs grow more complex.

State Street’s study also revealed often-overlooked generation X investors face a myriad of financial planning challenges including retirement planning, wealth preservation, eldercare, and supporting minor or adult children. Less than a third of advised Gen X investors received advanced planning services, highlighting a gap in meeting their financial needs.

Over half of Gen X investors are self-directed, the research found, with 45 percent citing high fees as a reason for not working with an advisor. A disproportionate share of gen X investors also feel underserved, with more self-directed Gen X investors (41 percent) reporting a lack of guidance compared to millennials (33 percent) and Boomers (26 percent).

The study also showed women, who currently control an estimated $10 trillion in wealth, are equally split between self-directed and advised investors, including 26 percent being advised-only and 24 percent using a hybrid investment approach.

“Women investors are leading the charge towards financial empowerment, yet many still strive for greater security,” Williams stated.

Compared to men, the women in the research were more discriminating about advisor credentials (62 percent of women vs. 52 percent of men) and firm reputation (51 percent vs. 48 percent).

Women with advisors were also overwhelmingly more likely to choose advisors based on referrals from a trusted source (48 percent vs. 40 percent of women) and have sticky advisor relationships of more than 10 years (46 percent vs. 36 percent).

Related Topics: Millennials, State Street, State Street Global Advisors, Women and Investing