Many younger investors are combining professional advice with digital tools and information from social media.hobo_018/iStockPhoto / Getty Images
More Canadians are getting investment information online, including from financial influencers, but these sources are, for the most part, supplementing rather than replacing traditional advice, a new study shows.
The Securities and Investment Management Association (SIMA) released a report this week about “finfluencers,” the latest study to examine how online content creators are shaping financial advice.
Although SIMA found more Canadians are getting information from finfluencers – particularly younger, educated, higher-income and self-directed investors – it wasn’t all bad news for financial advisors.
Rather than abandoning professional advice, many younger investors are combining it with digital tools and social media – a change to which advisors and firms will have to adapt.
The study found that overall satisfaction with advisors has remained high and largely unchanged for more than a decade. There also isn’t a significant difference in younger and older investors’ satisfaction with their advisors, even though younger investors are getting more financial information online.
Rather than replacing formal advice with informal sources because of dissatisfaction, the report says investors aged 44 and younger are simply engaging with both channels.
So, why is trust in traditional advice surviving despite the availability of ample and free content online? It comes down to scope and oversight.
“Finfluencer content is often narrow and fragmented, focusing on specific trends, assets, or short-term opportunities,” the report states. “Such content rarely provides the context or depth needed for investors without a strong financial background to fully understand the complexity of investment decisions or how individual choices fit within their broader financial goals.”
Advisors, on the other hand, come with credentials and regulatory oversight. They also offer empathy, judgment and advice tailored to a client’s specific context. In many cases, they develop close relationships through years of ups and downs, as Barbara Balfour reported this week, and that emotional labour is a growing part of the job.
But there’s still room to improve how advice is delivered. The cost of advice and other perceived barriers are driving investors to finfluencers, the report says, and more investors want advice that “falls between general financial information and comprehensive discretionary advice.”
The report encourages the investment industry to expand hybrid advice models such as “limited-scope or episodic advice engagements” and tech-driven models that include professional oversight.
“By recognizing and developing advice models that sit between informal online information and comprehensive wealth management relationships, firms can expand access to regulated advice and guidance while preserving suitability, accountability and investor protection,” the report says.
It also says advisors need to make an effort to meet clients and prospects where they are.
In addition to taking on a “fact-checking” role with clients to help assess the credibility of online content, the report says advisors need a greater online presence themselves: using short-form videos and other tools to explain concepts such as diversification and long-term planning.
“This approach helps to normalize financial conversations and serves to enhance visibility, humanize expertise and strengthen trust among younger, digitally savvy investors, who may be intimidated by the traditional advisory model,” the report says.
Dealers, of course, have a role in this by relaxing some pre-approval processes for posting digital content and allowing advisors to be more visible in a sphere dominated by unregulated voices, it adds.
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