November 2, 2021 | Stamford, CT — The share of U.S. retail investors ranking their financial advisors’ presence on social media as an important component to their relationship grew to almost 40% in 2021 from just 12% in in 2016 - an increase that illustrates the changing nature of the wealth management business. 

Despite a historic bull market and the proliferation of do-it-yourself investment tools, U.S. retail investors continue to rely on their financial advisors for professional guidance. However, to remain relevant, financial advisors must move beyond investment recommendations and suggested allocations by providing insights on new and complex topics, such as cryptocurrencies and ESG.  

To understand the topics that matter most to retail investors, Coalition Greenwich interviewed over 2,500 retail investors globally for a study commissioned by LinkedIn. The results outline what financial advisors need to do to win and retain clients and what retail investors are thinking in a post-pandemic world.

“Not every financial advisor needs to be a social media star, but being a part of the conversation matters more and more,” says Kevin McPartland, Head of Research in the Coalition Greenwich Market Structure and Technology group and author of Unique Markets Present Unique Opportunity for Wealth Managers.  “The best financial advisors should no longer differentiate themselves on a pure return basis, but rather by engaging clients with important ideas and information, not only through face-to-face conversations but also via e-mail, mobile, and social media.”

Financial advisors have the opportunity to leverage these new channels as an important source of education for clients in increasingly complex markets. For instance, 68% of the investors participating in this study do not currently invest in cryptocurrencies. The opportunity is not simply explaining the mechanics of buying and selling Bitcoin but helping investors understand the opportunity, risks, underlying technology, correlation to other assets, and the role that crypto investments might have in their portfolio. This could prove a helpful activity for financial advisors, especially when trying to attract or maintain millennial investors.

ESG investments offer another opportunity for financial advisors to differentiate, with more investors in need of services than currently receiving them. For example, only 37% of retail investors currently have ESG investments in their portfolio.

Education is as important as providing access to the investments themselves. Study participants were asked about the importance of 23 separate ESG factors related to investment decision-making, and that only scratched the surface. So while climate change, ethical labor practices, and corporate transparency resonate with the most investors today, the quickly changing nature of the world ensures that trendy topics will continue to rise and fall, ultimately creating more opportunities for financial advisors to take a more granular approach when tailoring investment portfolios for each unique client.