Young advisor outlines her approach
Whether informed by the trauma of several ‘generational’ shocks, the ongoing cost of living crisis, or a deep desire to be financially independent, many Gen Z Canadians are showing a predilection for saving that some older generations still lack. At the same time, studies have found that while Gen Z is saving, they aren’t necessarily investing with the same regularity, highlighting an area that the industry may want to take notice of.
Tara Lalehparvar works directly with young clients to encourage them to save and invest. The co-owner of Skyward Financial specializes in serving younger generations. She explains how a combination of DIY trends, social media influencers, as well as the blurring lines between investing and gambling can play a role in shaping Gen Z’s investment preferences. She outlined how she convinces risk averse young people to invest and how she manages clients who think trading and investing are the same thing. She emphasized the power of real world examples and storytelling in that work.
“The quickest and easiest way I’ve found to explain the importance of investing is to start by teaching the concept of inflation,” Lalehparvar says. “We can explain that through our lives we expect there to be a positive rate of inflation. We can average out the expectation that our cost of living will increase by at least 2.1 per cent every year, and if we are not earning at least that much in our savings then we are actually losing wealth every year. That point helps folks understand the importance of a rate of return.”
Lalehparvar notes that the recent spikes in inflation experienced since the COVID-19 pandemic have helped drive her point home. Now Gen Z clients have far more familiarity with the realities of inflation, which can help convince them to invest. From there, she discusses the concept of time horizons and outlines how younger investors have an advantage in time, allowing them to take on more equity risk which, in turn, should help them beat inflation over the long-term.
Adding risk, however, doesn’t mean engaging in what many younger investors identify with investing: day trading, cryptocurrency, and sports betting. Lalehparvar acknowledges the undercurrent of Gen Z culture that skews heavily towards speculative investments and the conflation of investing with gambling. She is able to demonstrate to clients who are put off by that kind of risky behaviour that managed investing doesn’t need to look like speculation and trading. She notes, too, that some younger people can be intimidated by the expectation that they learn everything there is to know about investing, but she shows that working with an advisor means they don’t have to put that pressure on themselves.
When serving clients who choose to engage in that more speculative kind of behaviour, Lalehparvar doesn’t come with judgement or admonishment of their risky choices. Instead, she encourages them to set aside some of their savings to self-direct, while putting other savings into managed investments. She makes sure that these clients are prepared to lose everything they have in their self-directed accounts, while stressing the protections built into a more managed approach. It allows these clients to engage with trading as a hobby without jeopardizing their life savings.
Gen Z investors are also vulnerable to the risks of online scams and finfluencers, simply by virtue of the online spaces they exist in. Lalehparvar argues that many of these younger investors with advisors are less vulnerable to these social media influences, because they have a trusted contact on this subject who they can interrogate these ideas with.
Empowering these investors, and giving them confidence, can help if they are scared of investing or if they are keen on day trading. Lalehparvar ensures that her clients understand that the goal of investing is not to turn them into billionaires, but to ensure their hard-earned money does the best it can for them and helps them pursue a comfortable life. She believes that taking this level-headed and educational approach can help any advisor reach their Gen Z clients more completely.
“There needs to be an understanding that the economy that young investors and young individuals are living in now is very different than the one that the advisor may be used to. The landscape is different. Prospects are different. Things that were affordable in the past just aren't anymore. And people's priorities shift. A lot of younger folks these days don't prioritize things that were traditionally prioritized in financial planning in the past,” Lalehparvar says. “You have to meet the client where they're at and show them that following steps X, Y, and Z is going to help them in the future.”
