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Millennial and Gen Z investors 'need human financial advisors' now more than ever: Researcher

Gen Z Researcher and Author Jason Dorsey sits down with Yahoo Finance Live to discuss the withdrawal of younger investors from brokerage accounts, the guidance of in-person financial advisors, and breaks down results from a study on Gen Z's aspirational perspectives.

Video Transcript

DAVE BRIGGS: Might not be a huge surprise on a devastating day like this for the markets that nearly 1 in 5 has closed an investing trading or brokerage account in the past year. The highest concentration among those closing accounts, millennials and Gen Z in responding to an Ally Financial survey. So is now the right time to stop investing? Jason Dorsey is a Gen Z researcher. He's also the author of "Zconomy." Good to see you, Jason. So why are, in particular, Gen Z and even millennials stopping investing right now? Is it due to inflation?

JASON DORSEY: Yeah, absolutely. It's due to inflation and the pressures on their income, right? They're having to draw down on whatever savings, draw down on their investments. Plus, you've got to remember, Gen Z never been through a market like this. Many of them opened the accounts during-- right, during the pandemic. They saw it go up, and many thought it was just going to go up. All of a sudden, it's going down. So we're seeing them close their accounts right now. We're seeing them move into more defensive positions. And at the same time, rents are going through the roof, which disproportionately affects these younger generations.

And one of my favorite things is that in our new study with Envestnet, people think millennials and even Gen Z aren't interested in finances. But in our new national study, younger millennials, ages 25 to 35, were the number one generation to look at their total net worth in terms of frequency. They were looking at their total net worth more than Gen X, more than baby boomers, you name it.

So I find it interesting that so much, as you know, of the headlines is, millennials aren't into finances. Gen Z doesn't care about money. And it turns out they're looking at it more than any other generation. Yes, it gets me fired up because I think this is one of those key insights we need to share.

SEANA SMITH: Well, and it should get you fired up, especially on a day like today, and especially since this is the younger generation, a generation that should be concentrating on building their wealth. So if they are closing investment accounts, obviously, that could have huge implications for their financial positions down the road. I guess, talk to us just a little bit more about the fallout, potential fallout from this and also where Gen Z is going for financial advice. Is it the traditional route, or are they more likely to go online?

JASON DORSEY: Yeah, so the fallout from this is going to be, in my opinion, massive for the younger generations if they don't get back into the market. The idea that they'll eventually be able to retire without starting to save and invest right now, it's just not going to happen. They have to take action today. So whenever I'm talking with millennials and Gen Z, I'm like, yes, the market's going to go up, the market's going to go down, but you have to stay a participant. We have time on our side. We may not see it, but we do. So we need to take advantage of that longevity and ride this out.

At the same time, where are they going for advice? I love this. In that same investment study, we found-- and this is a shocker. We found that the number one place where millennials wanted to go for trust when it came to financial advice, financial help, was a human financial advisor, right? I say this because they told us, we still trust a human being to help us with our finances more than anyone else. That's important.

Now, when you get to Gen Z, we see some differences. Gen Z, it turns out, they'll go to TikTok, what we call fintok, to try to get advice. And I'm always like, well, that could be entertainment, or it could be advice. You got to be careful. But the key thing for me is all the advisors watching right now, you have a clear role to play. People need you, and I would argue more than ever, particularly in choppier markets, because you don't know where to go and how to sit this out and the emotional roller coaster. That's why millennials and Gen Z, I believe, need human financial advisors now more than ever before.

RACHELLE AKUFFO: So, Jason, in terms of the trends of what younger investors are investing in, what do you see there?

JASON DORSEY: Yeah, well, they love to go after the growth stocks, first of all. You know, anything that's tech related, they know it. They like those brands. Of course, many of them now have a hangover from that experience, right? It's been pretty hard to write it up and write it down. The other thing we saw in the study was that Gen Z, and in particular, millennials in the national study with Envestnet, millennials were the generation most interested in crypto and the generation most likely to own crypto.

And we dug into that because you know me. I want to know why. That's my big thing. And what we found is that millennials, when it comes to crypto, feel they better understand it, which is so interesting. But if you think about it, it's always been through a mobile device. It's somewhat easy to follow, right? It goes up or down, stays the same.

At the same time, they don't have to get into all these underlying details about profit and PE ratios and all these different things. And they really understand it. It's almost gamified in terms of investment and if you really look at it from an interface. So that's why we see them really leaning into crypto. They tend to better understand it. And by the way, which isn't talked about often, you can invest very small dollar amounts now, which is what we saw all throughout the pandemic.

So we see a real overweight towards tech stocks, which, again, bore a lot of the challenge right now, and also towards crypto. And if you put that together, you can see why one in five Gen Z and millennials are closing their accounts right now. Right? It's been a rough time. But we got to get them to stay.

DAVE BRIGGS: It certainly does make sense, doesn't it? I want to shift from the investment strategy to another Gen Z study from UCLA, Jason. It says some enlightening things about how Gen Z views content. Here are some takeaways. Only 4.4% prefer aspirational content, aspirational stories, 4%. Another, they overwhelmingly want to see a white male villain if they are watching such a story. And finally, 55% view social media as the most authentic platform, and traditional TV weighing in at 2%. What's your broad takeaway from any of these observations?

JASON DORSEY: Yeah, well, they're great ones. First, let's look at aspirational because I dug into this study. I believe it's called Teens and Screens 2022, shout out to UCLA for that great study and name. What we saw when we looked at aspirational, that was more life of the rich and famous, right? That's how they define aspirational. And a lot of teens-- and we've seen this in our State of Gen Z study, it's in my "Zconomy" book. They don't want that. They don't aspire to that sort of materialism and sort of show-offness, if you will.

And so, as we saw, they were not inspired by it. They don't want to see that. They can't relate to it. And many of them are saying, that's not my value system. Big shift there, by the way, during the pandemic. What do we see about the villains? Look, I'm thrilled when we see teens say, well, we need to see diversity of all kinds everywhere in all roles. Like, that's just a shift that needs to happen. And it's so exciting to see that in that national study.

And when we look at authenticity, what do we know? Well, we've done a lot of work around authenticity. And when we saw it in the study, the way we tend to assign authenticity of value-- and this is super cool because I ask all the time, how do you define authenticity, when we've done all these studies, and people say, oh, it's being authentic. Well, we dug into that because that's not really an answer. And it turns out that authenticity to Gen Z means vulnerability.

And many of them feel like they can get vulnerability through social media. And if you look at the social media platforms that have really taken off, many of them are not the perfectly polished Instagram types, but we're seeing more stuff on Snapchat, even things on TikTok, where people-- you can see more of what they're really like. And I know that there are some generations watching right now, going, oh, these young people today, they shouldn't trust social media. I always like to say, well, who should they trust? [LAUGHS] I know, Yahoo Finance.

RACHELLE AKUFFO: That's a great point. There you go, for a perfect answer. And you raise a very important point about the content. It has to be authentic. It has to be relatable. Otherwise, you just feel disconnected from it. So lots of good points and great takeaways. Jason Dorsey, thank you so much for joining us this afternoon.