OppenheimerFunds has just released the results of our primary research study, the Generations Project, the latest installment of our in-depth look at the changing faces of and attitudes about wealth among high-net-worth (HNW) investors.
For this third installment of our research, we broadened the scope in two ways. First, we expanded the study to include HNW investors across multiple generations (Generation X, Baby Boomers, two different populations of Millennials (younger and older), and members of the Silent Generation in the U.S. and U.K.), rather than focusing exclusively on Millennials. Second, we included financial advisors that span the generational spectrum for the first time.
The results of our study, conducted in conjunction with CoreData Research, were interesting to say the least, as they reveal some potentially serious disconnects in communications and perceptions between advisors and clients. This comes at a time when the greatest wealth transfer in history is already well underway. Exhibit 1
We all know that when money transfers from one generation to the next, it can be significantly disruptive for wealthy families – and their advisors.
Research Objectives, Key Findings
OppenheimerFunds began the Generations Project with three specific research objectives:
- Help advisors better understand HNW investor behavior across generations, from younger and older Millennials, to Generation X, Baby Boomers and the Silent Generation.
- Capture how investors and advisors relate to each other when it comes to investing, financial education, wealth planning roles and expectations; point out important disconnects; and open the door for advisors to have conversations and seize opportunities.
- Give advisors a roadmap to help meet the changing needs of their top clients and provide the resources to help them do it.
Our study’s key findings as they relate to advisors include:
1. Advisors Risk Falling Short of Client Expectations
Advisors risk disappointing clients if they assume that clients, in their desire for life advice, no longer care about returns. Wealthy investors across all generations rank performance among their top three priorities; meanwhile, underscoring one of the disconnects between advisors and clients, advisors think investors rank performance sixth, behind factors such as transparency and fees. Exhibit 2
The key takeaways for advisors here are:
- The advisor’s role continues to evolve, as more HNW investors are seeking a personalized and holistic approach.
- At the same time, long-term investment performance remains a top priority for clients.
- As rising generations of investors seek help on every front, the demands on advisors will only grow – but so will the opportunities for those who meet these challenges head-on.
2. Wealthy Investors Are Compartmentalizing Financial Conversations
While advisors are clearly a vital source of financial information – nearly 75% of the investors we surveyed say they discuss issues such as investment strategy and taxes with their advisors – investors also share thoughts on money and receive guidance from a diffuse network of mentors and confidants that shifts from generation to generation. Exhibit 3
By compartmentalizing their financial conversations, investors may be putting themselves at risk, which means that advisors have an opportunity to add value, especially since our survey finds family members of all ages are reluctant to talk about money conflict resolution – even with their spouses.
Advisors who recognize these issues can bridge gaps, open the lines of communication, and strengthen their practice as an advisor to the whole family across generations, rather than just the primary client.
3. U.S. Families Are Not Prioritizing Financial Education
We found a startling trend on the subject of financial education: While 84% of investors say they learned about saving from parents, grandparents or third-parties, including financial advisors, just 48% say they plan to give their children a similar financial education.
Financial education priorities also vary by generation. For example, Millennials are most likely to teach their children about the importance of investing, while Boomers focus more on teaching savings and budgeting. Exhibit 4
We also found that advisors are stepping into the financial literacy gap: 76% say they provide financial education to client families.
4. Wealthy Investors Seek Sustainability, but Won’t Sacrifice Returns
We also found another interesting disconnect between investors and advisors about what they expect from their sustainable investments: Nearly 25% of the investors we surveyed rank long-term returns and sustainability as the most important sustainable investment characteristics, while only 10% of advisors believe returns are the most important feature of sustainable investing for their clients, ranking returns behind factors such as social and environmental impact. Exhibit 5
Part of the disconnect between investors and advisors on the topic of sustainable investing may be explained by our finding that today’s sustainable investors do not recognize a natural divide between sustainability and profitability. Rather, they expect the companies they invest in to both behave responsibly and make money.
Resources for Advisors
OppenheimerFunds offers a full spectrum of programs and resources that may help you apply the findings of our Generations Project in ways that will benefit your clients and help optimize your practice. These include:
CEO Advisor Institute – The OppenheimerFunds CEO Advisor Institute helps top-tier financial advisors run their businesses like world-class CEOs and engage their clients as trusted advisors. The Institute is a comprehensive suite of insights, content and tools designed to help advisors meet the needs of sophisticated clientele. The program includes several segments, including Compelling Wealth Management Conversations, How to Build a Professional Practice, and Constructing and Managing a Synergistic Firm.
Whole Family Advising – Give advisors the training and solutions required to serve the multigenerational needs of their HNW and UHNW client families. Resources outline specific steps advisors can take to prepare their practice and make the transition to a “whole family” trusted advisor.
Financial Literacy – The OppenheimerFunds Financial Literacy program provides insight about how to acquire, protect, and distribute wealth along the spectrum, taking into account various life stages. The program describes in detail choices and key recommendations around education, debt, life events and retirement.
Client Conversations – The OppenheimerFunds “Compelling Wealth Management Conversations” program is designed to provide the broad philosophical and historical perspective that investors need to defuse their fears and misperceptions. The program uses the power of analogy, metaphor, story and visual illustration to help keep investors “buckled in” to their long-term wealth management and investment strategy. It can also help them understand the fundamental principles that illuminate and guide investment decisions and illustrate where some of the tactical opportunities lie.
Sustainable Investments – The push for sustainability is a significant, durable global trend that has important implications for investors. At the same time, sustainable investing is a highly nuanced space lacking clear definitions or easy answers. In “Drivers and Detours on the Road to a Sustainable Future,” we explore the different ways investors can engage with sustainability, and the current state of performance and metrics for the sector.
For more information on resources and to learn about OppenheimerFunds’ consultative services, reach out to a local OppenheimerFunds consultant or call the consulting desk at 1 800 255 2750.
OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
OppenheimerFunds, Inc. partnered with the research firm CoreData, to survey nearly 2,000 investors and advisors in the U.S. and the U.K. CoreData Research LLC is not affiliated with OppenheimerFunds, Inc.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.