Will TikTok Replace Financial Advisors for the Next Generation of Investors?

An increasing number of millennial and Gen Z investors are turning to TikTok and other social media apps for financial advice. But a new study shows they are increasingly interested in professional expertise, too.

Some “FinTok challenges” may seem little more than child’s play to older financial advisors. Yet just because young investors enjoy getting savings tips from “finfluencers” on TikTok doesn’t mean financial advisors should write them off as a lost cause. 

While around 80% of people in these two younger generations get financial advice from platforms like Reddit, TikTok, and YouTube, they are increasingly interested in professional expertise too. According to a recent Fidelity survey, nearly two-thirds of millennial and Gen Z investors say working with a financial advisor is crucial to their financial success.

“The value proposition for my dad’s generation was around the investments,” said David Barfield, CFP, Financial Planner at Datapoint Financial Planning. “Gen Z and Millennial clients expect (and rightfully so) guidance on all areas of personal finance.” 

The appetite for expertise among the young is good news for financial advisors who can bridge the generational gap. The demographic shift represents a new source of growth for the industry over the coming decades, with 57% of current client assets on track to pass to the next generation before mid-century. 

New Generation of Investors

Young investors are motivated to improve their financial situation due to their experiences, including the Great Recession and the COVID-19 pandemic. According to Fidelity, nearly 75% of Gen Z investors feel strong pressure to improve their finances. In Q3 last year, 45% of all new retail accounts opened at the brokerage firm were by young investors aged 18-35. 

Despite their enthusiasm, advisors still need opportunities to engage with young investors. 85% of young investors desire behavioral coaching from advisors to prevent mistakes, procrastination, or impulsive decisions. However, only 13% of clients’ children have received outreach from advisors, and only 20% of advisors have clients under 60 years old with asset-weighted ages.

The younger generation is seeking out new knowledge. There is a plethora of information on blogs, social media, and YouTube, and it can be difficult to decipher which content encourages positive habits and what can create financial hardships. 

Not only are Gen Z and millennial investors looking for financial advisors to help guide them through personal finance, but they are seeking opportunities to enjoy the money they have already made as they travel and enjoy personal experiences. 

“Millennials are seeking a balance between living their best life today while saving for a successful financial future tomorrow,” says Michael Acosta, CFP and Owner & Lead Planner at Genesis Wealth Planning. “As a generation, they put a premium on experiences today vs. working head down for decades with hopes of being able to enjoy the fruits of their labor at full-retirement age.”

“These mindsets require a greater balance of building liquidity or accessible assets on their balance sheet outside of their qualified retirement plans,” he adds.

The new generation does not just blow their money but actively searches for guidance on investing and saving. Many in this generation have seen poor financial planning up close. They have witnessed their parents reach retirement age and miss out on enjoying the fruits of their careers and are determined to avoid the same fate.

That is where financial advisors have a chance to help the new generation form goals for their future. Not only to create plans for their future but to help them establish knowledge and strategies for future tax implications. 

According to the 2022 Investopedia Financial Literacy Survey, paying taxes ranked as Gen Z’s second priority, with those with a lower income showing proportionally more interest in the topic.

“Working with younger clients, we coach them to think about tax diversification as they are accumulating wealth in taxable, tax-deferred, and most importantly tax-free buckets,” said Chris Berry, CFP and founder of Castle Wealth Group.

Taxes are a priority in the minds of most people. Still, as the new generation ages, they need to know about tax strategies like investing in Roth IRAs or using tax-deferred accounts like an IRA or 401K and learn how to perform Roth conversions. Not only are those retirement accounts important, but taxable brokerage accounts could also be a choice to help provide for them if they decide to leave the workforce early. 

These are all different subjects that financial advisors can address in the new changing world. It is not only for those with a considerable net worth or many assets but for many people in the new generation who need guidance to help create a better financial future to achieve their goals.

Bridging the generational gap requires empathy and a willingness to engage younger generations where they are. Those financial planners who can see things from their perspective will be well-positioned to serve this demographic as they age and accumulate greater wealth.