4 Investor Segments to Tap for Competitive Advantage

What You Need to Know

State Street Global Advisors asked members of these rapidly expanding groups about their views on investing and professional advice.
Hybrid investors maintain a relationship with a traditional advisor alongside at least one self-directed account.
Less than a third of advised Gen X investors received advanced planning services.

Women, hybrid investors, Gen Xers and millennials are high-growth investor groups whose integration into client segmentation strategies can bolster advisors’ ability to attract and retain clients, according to a study released Monday by State Street Global Advisors.

These four investor cohorts have a strong desire for collaborative relationships with advisors, a heightened demand for modernized technology and tools, and a clear expectation of competitive fees aligned with a compelling value proposition. 

“The findings from our study underscore the opportunity for advisors to embrace a growth mindset and tailor their services around investors’ preferences and objectives, rather than trying to fit clients into existing offerings,” Brie Williams, head of practice management at State Street Global Advisors, said in a statement. “Changes in consumer behavior are redefining expectations.” 

Advisors who fail to recognize and respond to the potential presented by these rapidly expanding investor groups risk letting a significant portion of the market pass them by. 

State Street Global Advisors partnered with A2Bplanning and Prodege to conduct an online survey in September among a random sample of 1,503 individual investors in the United States ranging in age from 27 to 77. Forty-eight percent were male and 52% female; a third each were millennials, Gen Xers and baby boomers. Thirty-one percent had $250,000 to $499,999 in investable assets; 35% had $500,000 to $999,999 and 34% had more than $1 million. Half used a financial advisor.

The study provides insights and considerations to help advisors position their offering to appeal to each segment.

1. Hybrid Investors

As defined by the study, hybrids maintain a relationship with a traditional advisor alongside at least one self-directed account (a self-service or a robo platform). When it comes to the importance of leveraging technology, two-thirds said a good technology platform is important when selecting an advisor. 

High advisory fees are a hot-button topic for hybrid investors, posing a risk for advisors with noncompetitive fee structures. According to the survey: 

60% compensate their advisors based on assets under management
45% said they would leave or switch advisors if those fees increased
43% said the cost savings of using self-directed accounts is a benefit
47% of hybrids have exchange-traded funds in their portfolios, compared with 37% of self-directed only and 27% of advised-only investors.

“Hybrid investors’ willingness to collaborate with an advisor only goes so far, as this cohort is quick to reconsider the relationship if they perceive subpar outcomes and higher fees,” Williams said. 

2. Millennial Investors

Millennials represent the fastest-growing generation of investors, both in numbers and in investable assets. Having grown up alongside the internet, smart devices and social media, they navigate the digital landscape better than any earlier generation. 

The survey found that 82% of millennials are hybrid or self-directed only investors, underscoring the significant influence of technology on their advisory preferences and financial decisions. They avidly use a range of self-service investing platforms. Nearly half of these self-directed investors rely on online tools and calculators for their investment decisions. 

As millennials accumulate wealth and navigate increasingly complex financial needs, they become prime candidates for formal advisory relationships. Notwithstanding their historically high rates of direct provider platform use, 67% of advised millennials collaborate with their advisor on investment decisions. 

As well, advised millennials are more inclined than older investors to involve their advisor in day-to-day finances, including cash flow management, insurance, private banking and debt management.