This brings me to the third feature of a trusted financial adviser – the adaptability to change. Traditionally, financial advisers have been a staple for high net-worth individuals. Gen Ys have rarely been reached, reinforcing the unfortunate perception that financial advisory services are an “outdated” concept, or simply not for younger generation. This must change going forward, as this generation represents a large untapped market for financial advisers, and will continue to grow in importance as their wealth increases over time. Whether financial advisers adapt successfully in reaching out to Gen Ys depends on their ability to understand the unique characteristics of this demographic. Gen Ys actively compare products using a wide range of information, such as online research, social media and peer reviews. They are also accustomed to services being convenient, real-time and on-demand. Within the context of financial advisory, engaging Gen Ys may also have a specific challenge – that is, planning for long-term goals such as retirement or wealth accumulation may take a back seat to more immediate needs. To meet these demands, financial advisers must be flexible enough to employ a range of engagement methods. For example, financial advisers should take advantage of social media platforms as part of their marketing strategies. Financial advisers could also leverage on interactive online platforms to better engage with Gen Ys. Recently, tech start-ups are launching applications to match consumers seeking financial advice to financial advisers seeking customers.
This deprived the inexperienced investors of the necessary help and support. A look at, for example, the advice that was provided before stock markets began to fall tells the same tale: recommendations to sell made up less than one per cent of all advice. The media latched onto the stock market boom with reports of rapidly rising share prices. Instead of taking a critical look at what was happening, the notion that the new economy offered chances of earning a quick profit became the conventional wisdom. The part played by human psychology for herd behaviour in financial markets has in fact given rise to a new school of financial knowledge, known as Behavioural Finance. Two key concepts in this analysis are just conventional wisdom and wishful thinking. There’s nothing odd about that. When people make investment decisions they function in much as the way as in other contexts. A familiar example is our reluctance to enter a restaurant that is empty - we generally prefer one that already has many guests, particularly if there is a long queue outside. We simply rely on the good judgement of others and assume that all those inside have made the right choice. By arriving at a better understanding of how people behave, we can certainly do a good deal to prevent unduly large mistakes in market pricing and perhaps ultimately reduce the occurrence of financial bubbles.