Of all the technologies that emerged over the last 20 years, which has had the biggest impact on your daily life? A quick straw poll among the Hedgehog team has us split between smartphones and the internet. 

Since one is an enabler of the other – and this article is about smartphones – we’re falling on the side of the internet-enabled pocket device that we’ve all come to rely on for everything from ordering dinner to turning up the heating. When Apple launched the app store in 2008, it couldn’t have picked a better tagline than, “There’s an app for that.” Smartphones have profoundly changed our expectations as consumers; we now expect to be able to do most things instantly through an app. 

Money management is no exception. A recent report by deVere showed that the use of its finance apps has grown 65% year-on-year. Managing our money with the swipe of a thumb is rapidly becoming the norm, and it’s set to drive some interesting trends over the coming years. 

1. Say goodbye to your parents’ banker

The proliferation of smartphones and the app stores they support have increased our choices as investors no end, broadening access to a range of financial products and services. It’s not just the younger generation that are making use of this; deVere’s survey showed that fintech app use is growing among Boomers (i.e., the over 60s) faster than any other generation. 

As the greatest wealth transfer ever creeps closer – Boomers are expected to pass on a record $86trn to their children – wealth managers find themselves in an entirely new position.They need to cater to three (soon to be four) generations with very different technical capabilities and investment goals. And they need to do it well, because it’s incredibly easy for investors to switch to other providers. 

Gone are the days of sticking with your parents’ wealth manager. This is the age of choice; investors aren’t short of it and financial providers need more than just good relationships to meet the needs of clients. They need to provide options, ease and instant access. 

2. Alternative investments are on the rise

While Boomers are finding new ways to access mature instruments, the generations below them – those aged 21 to 42 – are more sceptical of traditional markets. The vast majority (73%) of younger US investors don’t believe they can achieve decent returns with a stocks and bonds strategy. For comparison, just 32% of older investors say the same. Younger investors are far more likely to invest in crypto and digital assets, private market opportunities and their own businesses.

Fig 1. Research showing the growth opportunities preferred by investors of different ages. Source: Bank of America, 2022.

But how do you invest in an asset class that’s historically been inaccessible to individual investors? We’re not just seeing a difference in generational risk profiles at play here; we’re seeing first hand the differing expectations of digitally native investors and how smartphones have driven them. Alternative investments have historically been difficult to access and older generations likely don’t consider these viable options because they simply weren’t for most of their lives. Yet their younger counterparts, who were part of the fast-paced change brought about by the internet, are less likely to accept that an opportunity is unavailable to them. The smartphone is giving these investors choice at a time when there is still a gaping hole in the education around alternative assets and the companies providing them. The experience of this younger cohort is that technology can and will remove traditional barriers, if not now then soon, and they can research and find these opportunities online. As they demand more, alternative investment opportunities will grow to meet this need. 

3. Sustainability is everything

A focus on sustainability is another marked difference between the generations. While 24% of US investors aged 21- 42 believe companies and funds that focus on ESG (environment, social and governance) present the best opportunities for growth, only 13% of those over 43 agree. Younger investors are also more likely to report favourably on the impact and returns of their investments than older cohorts.

There is already speculation that the wealth industry can’t keep pace with the current demand for sustainable investments. This puts pressure on financial service providers to source more sustainable opportunities. The fact that younger generations apparently attribute more value to their sustainable investments is also telling, and suggests that projected returns won’t be the only metric investors use to determine if an opportunity is right for them in the future.

The next frontier of smartphone investing

The last twenty years have brought with them some fundamental changes, but we shouldn’t get too comfortable with the status quo. Technologies like Quantum, artificial intelligence and blockchain are on the horizon, and they’re bringing with them even more change.

So far, blockchain has failed to live up to its initial promise to overhaul finance, but we’re seeing evidence now of this fledgling ecosystem moving away from speculation to something more concrete. The migration of lower risk and real world assets on-chain has already started and, once it picks up pace, will help to increase liquidity. This could be pivotal, as illiquidity is frequently cited as a reason for retail investors shunning alternative assets.  

Just as smartphone apps did in the first decade of fintech, blockchain has the potential to remove traditional barriers to the markets. This technology can open up alternative assets and private market opportunities, reducing the need for intermediaries with smart contracts and facilitating fractional investing with tokenization. It could address the demand for sustainable investments by increasing traceability or bringing carbon offsets on-chain. In short, it will help meet the changing needs of investors.

Smartphones have been a phenomenally important technology for many industries, including finance, and will continue to drive change. They provide access to financial education, facilitate increased access to the markets and have sparked a revolution in wealth management that’s only just getting started. 


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