There is a wide range of understanding regarding financial products, due to the easy access of information, the bar has been raised by HNW investors. They are much more knowledgeable than they used to be, and they expect you to know even more than they do. Over 60% of affluent investors understand their 401(k) plan or other defined contribution plan while fewer than 15% understand Separately Managed Wrap Accounts. Although investors are interested in hedge funds and alternative investments, they have low knowledge levels. It is more than likely that today’s affluent investor is far more knowledgeable than the affluent investor of 25 years ago. Despite this vast amount of information, you will see that that there are a significant number of individuals who are not familiar with a number of investment products. Are these the consumers your company or its advisors should be focusing on? How should investment knowledge impact your sales strategies?

So what does this mean for financial services providers?

• Focus on informing investors about new products and services, wrap accounts, 529 plans, and alternative investments, which may fit in your client’s portfolios – but they need to be educated. 
• Financial Service Companies need to recognize that their best clients are well educated and very informed about financial matters. By educating and informing their less educated clients, financial service companies are helping their clients become more knowledgeable, thus making better decisions and better investments. This can’t help but create greater satisfaction and loyalty among clients.
• Keep clients educated. This can take place by having an informative website, offer newsletters, keep clients informed through publications and phone calls. This will provide greater opportunity with the self-directed.
• Develop expertise in the vast array of financial products to meet the ever increasing demands of today’s knowledgeable investor. Developing this expertise can come through partnerships, mergers or developing in-house proficiency in the assorted financial products and services.
• The bar has been raised. Realize that today’s younger investors are clearly more knowledgeable than investors of the past. This means investor information and education must be on ongoing part of a financial service companies plans and programs for the future.
• Target your education efforts by wealth segment. These include females who have been thrust into the role of financial decision maker because of death or divorce, those who are going through major life changes such as retirement, changing of job or buying or selling a business. Education, particularly to these groups, will foster loyalty and will create a more knowledgeable investor, who when coupled with the expertise of an advisor, can become a far better investor and a more profitable investor to the financial company.

Investor knowledge is increasing and won’t be going away. For Financial Service Firms this can be good. Knowledgeable investors are more likely to continue to invest in multiple products and services. The knowledgeable investor, coupled with support from their financial service firm, creates a synergistic effect that makes the whole greater than the two individual parts. Financial service firms should embrace investor knowledge and work with their clients to further expand their knowledge of financial products.

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