➤ Financial advising needs vary across different generations. Millennials are especially looking for more meaningful relationships with their financial advisers.
➤ Although there has been some disruption with the pandemic, one AIG executive believes it has also paved the way for deeper engagement between financial advisers and clients.
Kevin Hogan, executive vice president and CEO of life and retirement at American International Group Inc., recently partnered with Joe Coughlin, founder and director of the MIT AgeLab, for a study that looked at the ways financial advising is evolving for people across different stages of life. They found that clients are searching for deeper and more personal relationships with their advisers.
S&P Global Market Intelligence caught up with Hogan and Coughlin to speak about the impact the pandemic has had on financial advising. The following is an edited version of the conversation.
How are the needs of financial clients changing?
Kevin Hogan, EVP and CEO of life and retirement at AIG
Kevin Hogan: The value of advice is really evolving very rapidly, especially in the face of COVID-19. But over the last couple of years, there has been an increasing awareness of the connections between physical health and mental health alongside financial health.
People born today are expected to live more than 100 years, and one of the biggest concerns that people have is whether they will live a holistically happy life, one where they can do the things they want to do and that they're comfortable and financially secure. In the face of COVID-19, we worked with MIT to conduct a study to really push the outside of the envelope on this. What is it that clients in this environment are hoping they can talk with their advisers about and get some advice on beyond the world of financial planning, which has been the focus really up until relatively recently?
What we found was clients are very willing to talk with their advisers about concerns such as their physical health, expenses for looking out for their own care in their future and things like that that advisers are not generally engaging in right now.
Joe Coughlin, founder and director of the MIT AgeLab.
Joe Coughlin: This new expectation of living longer, better and differently is really putting clients and families in a position of navigating a new world of old age that frankly no previous generation has experienced before. Without financial security you can do little else, but in a world where clients are familiar with Amazon and Google or where there's an app for almost anything, even books, ... they are now looking for advice and welcome conversations that will help them navigate all these things we now anticipate with older age.
What kinds of conversations are you finding valuable?
Hogan: They certainly do differ generationally. The younger generations like the Millennials and Gen X want more conversations related to not just the financial future, but the future in general. In particular how they can think about their own health, what their future life goals may be and how to handle career transitions. These are things that will allow the advisers opportunity to think about working in the best interest of their customer on a holistic basis. Really what the younger generation are looking for in an adviser is not just a financial professional, but like a friend. It's an opportunity for a financial adviser to create a really personal bond that goes well beyond the value of robo advice. Technology and tools like that are important part of the planning process, but what the study confirms is that Millennials are looking for something over and above just that financial planning piece of it.
There's been mixed commentary on financial advisers being able to engage with their clients due to a lack of face-to-face communication. What is your perspective on this?
Hogan: The first impact of the pandemic was that it disrupted contact and communication, and following that period there's been a broad rediscovery of the power of the technology that exists and the power of communication through things like multimedia that allows advisers to be able to reconnect with their customers. ... [T]he shock of the face of the pandemic alongside the face of the economic implications of the pandemic and then the timing of the social unrest, etc., has really raised the awareness in many people's eyes ... that financial planning is just one aspect of planning for the future. Almost anyone's plans can be disrupted at any time so there's a real premium on that aspect, and we’ve seen our advisers begin to respond to that.
Coughlin: The pandemic is going to transform advice to having these broader conversations and perhaps having more conversations shorter in duration about a wider breadth of information and topic, on Zoom, via text or on the phone. The pandemic has changed the relationship, but in many ways it may have made it deeper and better and more able for advisers to retain their clients.
Has there been a greater interest in certain products like life insurance?
Hogan: I think it's very difficult to generalize. The whole point of an adviser working in the client's best interest is understanding what their personal situation is, what their personal goals are and what their personal sort of asset base may be, their income, their health history, and to build a plan around that. Certainly, I believe across the industry there has been an increased awareness of the importance of life insurance, but there's also, especially in the face of a very volatile economic situation with extremely low interest rates and a lot of questions about credit, renewed interest in long-term accumulation products of various forms of annuities with or without guaranteed living benefits.
I think really this whole situation has been a reminder for everyone as to what we see as a big opportunity, which is that the need for guaranteed lifetime income solutions is enormous and getting larger because companies are no longer providing defined benefit pension plans, the government and Social Security benefits are not what they used to be. People really have to look out for themselves, and so I think that the ongoing demand for our products, there may be some small disruption associated with this, but the strategic opportunity continues to be the same.