We live in an age when data is increasingly the new form of currency.
In the financial services industry, this means that your average investor has access to more information than ever before and is using that data to make financial decisions in entirely new ways.
New tech, new perspectives, new expectations
The rapid adoption of mobile and API-driven technologies has armed the latest generation of investors—not only with new tech, but with new perspectives and expectations.
“People are less trusting of advisors who say, ‘This is the best portfolio to go for,’” says Kal Salem, COO of Incloud. “Based on what? How much do you really know?”
Whether it’s with the help of powerful self-investing apps, such as Wealthsimple or Mint, or websites like MarketWatch, more and more investors are moving towards a self-managed, democratized investment model.
Modern investors are increasingly capable of doing their own financial research and can seek advice from a wide range of sources not restricted to industry experts—meaning they get to stay in control of their finances.
As a result of this newfound control, investors are demanding more from their financial advisors. They’re expecting more individualized and customizable experiences and wish to receive advice that reflects their own unique circumstances.
And it’s not just the self-service generation that’s adopting this strategy. Previous generations are being influenced as well. For example, kids are teaching their parents how to use their new investment app.
The rise of robo-investing
The increased popularity of robo-investment platforms, which offer a hands-off approach to investing, shows that investors are increasingly taking ownership of their wealth—and the financial decisions they make.
Platforms like Justwealth, Questwealth Portfolios, and Wealthsimple turn client survey data into complex algorithms that produce customized financial plans and asset allocations.
This results in automated, balanced portfolios that are spread out broadly across the entire market, ensuring diversification and lowering risk. The shift towards passive investing, with the goal of gradually building wealth over time, is clear.
Another more immediate advantage of robo-investing is lower fees thanks to automation. In many cases, there’s no commission, and this decrease in overhead costs mean more money in the pockets of investors, or more money to invest.
The combination of self-investing and robo-investing is changing the overall behaviour of tech-savvy, high-net-worth clients that were once largely dependent on advisors for information and guidance.
Financial citizens of the world
As globalization continues to make the world feel smaller, investors are thinking big when it comes to foreign opportunities.
According to a recent survey from RBC Wealth Management and The Economist Intelligence Unit, younger high-net-worth individuals are substantially more enthusiastic about foreign investing, with 72% possessing some amount of overseas investments compared with only about 50% of the older Baby Boomer generation.
Younger investors are identifying globalization as a promising wealth-generating opportunity, a perspective that’s shared by business owners and entrepreneurs.
Given that more and more younger North Americans are taking on “side hustles”—turning creative hobbies into ways to boost their income—it makes sense that they’re also taking a more entrepreneurial approach to investing.
Socially responsible investing
Another way that the modern investor is choosing to do things differently is by prioritizing socially conscious and sustainable investing.
Environmental, social, and governance (ESG) investing has become increasingly important. According to McKinsey, global ESG assets totalled $2.5 trillion midway through 2022, and more than 90% of S&P 500 companies now publish some type of ESG report.
Investors are no longer solely interested in maximizing profits and minimizing risk. They want to support areas with a positive social impact—for instance, fighting climate change, reducing inequality, or responding to humanitarian crises such as the war in Ukraine.
Reasons for optimism
Regardless of their experience and assets, all investors feel some level of uncertainty about their financial well-being amidst the volatility of the global economy.
The good news is, spirits are high. Optimism among investors, especially younger investors, remains strong.
A recent RBC study revealed that 83% of Canadians feel confident about reaching their financial goals when it comes to creating, preserving, and managing their wealth, and tend to be flexible, attentive, and responsive in their investment strategies.
Amidst many challenges, modern investors are reshaping the investment landscape to suit their specific needs, leveraging technology to create personalized, data-driven, and socially responsible portfolios.