Family oriented advice could close the gap, but conflict of interest is important

As things currently stand, the gap between adviser capacity and those seeking or in need of it is growing, with Gen Z remaining a particularly under-represented demographic in advice.

Not only are issues such as the unaffordability of advice for younger Australians locking Gen Z out of advice, but so is visibility among this market, with this cohort also being the most difficult demographic for advisers to reach. This is exacerbated by the fact that many practices are simply not looking to attract this section of the market.

“Young people are feeling locked out of the market because the industry to this day focuses on supporting older, wealthier Australians,” Glen Hare, co-founder and adviser at Fox & Hare Financial Advice, told ifa in September.

“The average age of an advised client is 58 and most firms still have pictures of golden oldies on yachts sailing off into the sunset.”

With fears about having a financially inadequate retirement and low levels of financial literacy, Gen Z is an untouched demographic that would benefit highly from advice.

One way that has been suggested to attract Gen Z to the table is by leveraging family connections, a common practice that already leads to many referrals.

Introducing the children of clients into the advice process could be potentially useful in proving the value of financial planning, according to Neil Rogan, head of distribution for Australia and New Zealand at Russell Investments.

“It is a long-term game. For the younger group who are wanting more advice and wanting to feel more confident, the specific areas they want to feel more confident in is [long-term] navigation [of financial markets].

“It’s really about doubling down on showing the long-term gain and providing some evidence and proof of points.”

Rogan also highlighted that this model could help shape a parents wealth portfolio and investments, using their children’s values to inform decisions and create portfolios their children would be happy to inherit one day.

However, Fradley Advice’s Nathan Fradley highlighted to ifa that this kind of model for attracting younger clients can be fraught with conflict-of-interest issues, especially when the children want to start seeing an adviser individually.

“Fundamentally a business model like this requires multiple advisers, or acute awareness and acknowledgement of conflicts of interest and how they interplay,” Fradley explained.

Conflicts of interest could include preferences over how inheritances should be structured, seeking control of other family member’s finances and conflicting values in investments.