The evolution of the MFD business is now a mandatory requirement, where the next generation has already started joining the Industry. In the last 20 years, the financial distributors Industry has witnessed a sea of changes, starting from regulation to the maturity of financial products. The time has come to step ahead and get into family offices formation and redefine the definition. The Gen Z population is growing, and now, as a financial advisor, one has to deal with 3 generations of clients as of today. This leads to a significant opportunity to grow into a family office model. One needs to know in 2025 that Gen Z are the new investors who will be earning and will surpass the millennials soon. These are the new breed of clients, and one can't ignore them. Well, it is not IT that attracts them or the ease of doing trades in apps, but something else which, as a financial advisor, one misses to capitalise and misjudges. Gen Z are born middle-class and semi-rich segment irrespective of struggle in life. It's the blessing of the consumption boom.
The current income tax benefit given
by the Indian government, where family members earning less than 12 lakhs per
annum don’t have to pay any income tax, leads to significant savings. Now these
investors do not belong to AIF and PMS. Hence, they belong to mutual funds.
Indian equity penetration is just 5.5% compared to the U.S, where it stands
around 45%. Retail business in Mutual Fund is a stable business where investors
and their money both stay long-term. But the current generation of Gen Z needs more attention
from your business end.
Generation Z (born 1997–2012)
presents unique challenges for financial advisors in India and globally when it
comes to investments, driven by their distinct financial behaviours,
technological reliance, and economic context.
Gen Z investors in India lack
deep financial knowledge despite early exposure to investing. According to a
2022 Investopedia survey, only 25% of Gen Z feel confident explaining the stock
market, with many relying on social media (e.g., TikTok, YouTube) for advice,
where misinformation is rampant. In India, finfluencers on platforms like
Instagram often promote quick-rich schemes or risky trades, misleading young
investors. Gen Z in India is drawn to volatile assets like cryptocurrencies
(55% of U.S. Gen Z hold crypto, a trend mirrored in India) and meme stocks,
influenced by social media and FOMO.
Gen Z prefers commission-free
apps like Zerodha or Groww, with 56% of U.S. Gen Z using mobile apps for
investing, a trend strong in India due to low-cost platforms. They often bypass
traditional advisors, favouring robo-advisors or self-directed trading, which
can lead to poorly diversified portfolios.
Why do they need more attention?
The current volatile times do not
allow them to plan for long-term goals. Gen Z in India faces economic pressures
like rising education costs and job insecurity, with over 50% worried about
insufficient funds, per EY’s 2023 study. Only 16% of Gen Z consult financial
advisors, preferring family (41%) or social media (22%) for advice, per a 2024
Insurify survey. In India, this is compounded by distrust in traditional
banking products like fixed deposits.
Managing unrealistic expectations
from this generation creates more volatile investment planning and more issues
and hurdles for financial advisors. Gen Z’s optimism, with 73% starting financial
planning before 25, can lead to unrealistic expectations.
Where do financial ADVISORS lack, and where is the path of improvement to deal with Gen Z?
They need to improve in
communication to develop the relationship and reduce the gap with Gen Z. The
main problem lies with communication and understanding their current issues,
rather than just getting into straightforward traditional products pitches.
Gap of Understanding: Advisors emphasise
long-term goals like retirement, but Gen Z in India often prioritises
short-term needs (e.g., funding EMIs or travel), with only 20% saving for
retirement, per EY 2023. Advisors’ long-term pitches feel irrelevant, pushing
Gen Z to speculative trades for quick gains, like IPO flipping, which surged in
India in 2024. Hence, as a financial advisor, frame investments as tools for
short-term goals (e.g., saving for a gadget via liquid funds) while gradually
introducing long-term benefits of equity funds.
Educate on Basics: Focus on SIPs, ELSS for tax savings (under Section 80C), and diversified equity funds to align with India’s market growth. Only 16% of Gen Z consult advisors, preferring family (41%) or social media (22%), per Insurify 2024. In India, distrust in traditional finance is high due to past mis-selling scandals. Build trust through transparent fee structures, SEBI-registered credentials, and alignment with Gen Z’s values
Engage on Social Media: Counter finfluencer
noise by creating concise, value-driven content on platforms like Instagram or
YouTube. This is a major drawback of content creation. Advisors struggle to
build trust when competing with viral, oversimplified content. Create engaging,
credible content on social media, explaining concepts like SIPs or mutual funds
in bite-sized formats to align with Gen Z’s consumption habits. Advisors’
complex jargon or product-heavy pitches alienate Gen Z, who prefer
straightforward guidance. This leads to poor investment decisions, like
over-allocating to small-cap stocks. Offer workshops or infographics on basics
like compounding (e.g., ₹5,000 monthly SIP at 12% grows to ~₹50 lakh in 20
years) or SEBI-regulated products like ELSS for tax savings.
Highlight credentials and
transparency, offering free initial consultations to demonstrate value. Their
preference for tech-driven solutions, with 56% using mobile apps for trading,
will accelerate the adoption of robo-advisors, AI-driven tools, and low-cost
investment platforms, pushing traditional financial institutions to innovate or
risk obsolescence.
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