Crafting Personalized Portfolios for Gen Y and Z through Direct Indexing

Crafting Personalized Portfolios for Gen Y and Z through Direct Indexing

Explore how financial advising is evolving with Direct Indexing to meet Gen Y and Z's need for personalized, impactful investment strategies.

Jack Casady

Practice Management
January 11, 2024

The great wealth transfer has already started, and the question looms, how do you plan to meet the needs of next-gen clients?

According to Cerulli Associates, the next-generation clients are expected to inherit a whopping $84 trillion. Therefore, advisors must have solutions that fit the needs of these next-generation clients.

As Financial Advisors adapt to this new pool of clients, understanding the preferences and expectations of Generations Y and Z is now more important than ever.

Raised in a world where customization is not just a luxury but a norm, as seen in their interactions with brands like Starbucks and Ikea, these generations demand a similar level of personalization in their investment portfolios.

Consider this: over 60% of Starbucks orders are tailored to the individual's preferences. Like all preferences, it can be as simple as a splash on half and half to a complex order like extra hot, venti, no foam soy latte with two pumps of sugar-free vanilla and a sprinkle of cinnamon.

It's understandable why Gen Y and Z investors seek personalized investment solutions. Their entire lives are individualized to them.

These next-generation clients will require portfolios that resonate with their values and goals, meticulously crafted with their direct input.

The days of placing a client with a long time horizon and high-risk profile in an 80-20 portfolio will not be enough for them.

But why stop at personal preferences like explicit company exclusions? Why not also address critical global issues, and systematic issues, or even produce a thematic lens with more customization than a handful of ETFs might offer?

However, it's more than just avoiding the negatives. These next-generation investors want to actively support positive impact, seeking increased exposure to companies excelling in areas like clean energy and workplace equality. This isn't just about making money; it's about putting their investments towards positive impact.

Direct Indexing provides a path to meet this next generation of client where their investments align with their values

Achieving these goals will mean tapping into the growing trend of Direct Indexing to help produce personalized portfolios that navigate the layers of complex values and beliefs that need to be incorporated into these investments.

This is where First Affirmative and YourStake step in with the Values-Aligned Direct Index Solution (VADIS).

In an investment landscape where client needs are increasingly complex, VADIS emerges as an ideal solution for Direct Indexing, especially in scenarios where:

  • Clients prefer individual securities over funds.
  • Clients are in high tax brackets for prolonged periods.
  • There's a demand for extreme portfolio customization.

Why incorporate VADIS into your practice?

  • It's accessible for investments starting at $25,000.
  • Competitive fees at just 36 BPS.
  • Full customization is available at every investment level.
  • VADIS supports proxy voting alignment and operates on a multi-custodian platform.

The result? A service that not only meets the financial goals of Gen Y and Z but also resonates with their desire to impact the world positively. It's not just about giving them what they want; it's about giving them what they need in a way that speaks to their core values.

To learn more about VADIS, contact our team to understand more about the platform.

The verdict on why Direct Indexing is essential to your practice in 2024

The future of financial advising is not providing just an investment portfolio, but rather it's about delivering a comprehensive wealth experience. With solutions like VADIS and Advisor Core, financial advisors are well-equipped to meet these evolving demands, offering a service that is as much about personal values as it is about personal wealth.

Welcome to the new age of financial advising, where personalization, impact, and transparency are the keys to success in capitalizing on the wealth of next-generation clients, especially for Advisors focused on growth in 2024.

Disclosure:

Mention of specific securities is not an offer to buy or sell that security

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