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Thematic Investing vs. Traditional Strategies: Which is Best for Global Investors?

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Global Logistics, Global Trade Daily, International Trade

Thematic Investing vs. Traditional Strategies: Which is Best for Global Investors?

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The growing popularity of thematic investing has left many investors unsure about which path to take. Are you up to date with the latest sector trends, ready to bet on a changing future, or do you prefer the stability of tried-and-true methods? Thematic investing is praised for generating returns by focusing on long-term growth sectors like technology and environmental trends, appealing to those who want investments aligned with personal beliefs. In contrast, traditional strategies prioritize fundamentals such as company performance and consumer behavior. Choosing the right strategy depends on your goals and risk tolerance, whether seeking dynamic growth or stability.

Read also: The Growth of Global Investment: Digital Nomads and a New Generation of Investors

What is Thematic Investing?

Thematic investing focuses on long-term changes rather than short-term factors, seeking growth through exposure to themes like sustainability, technology, and societal change.

What are Thematic Funds and Thematic Strategies?

Investors seek new ways to gain exposure to trends, and thematic funds offer a unique alternative, focusing on world-shaping themes. For example, a clean energy fund capitalizes on the global move towards sustainability. Thematic funds differ from traditional ones, which may be based on general energy companies, applying a narrower focus on companies innovating in renewable technologies. This includes potential growth industries like artificial intelligence and urbanization.

Change Drivers and Growth Opportunities

Thematic investments are anchored in major mega-trends shaping industries. Climate change and the transition to alternative energy spur innovations in energy efficiency. Technological developments like automation and AI drive sector evolution, making investments in the future and tech-driven societies. These drivers offer growth opportunities that can meaningfully impact markets and provide attractive returns.

Thematic investing and the rise of ESG.

Environmental, social, and governance (ESG) factors are growing in importance within thematic investing, ensuring investments are sustainable and ethical. ESG offers insight into long-term risks and opportunities often missed by traditional criteria, positioning investors to capitalize on sustainable growth and innovation.

A Comparison of Investment Strategies

Recognizing the differences between thematic and traditional investing helps make informed decisions, with five strategies based on holdings, risk, and diversification for portfolio enhancement.

The Inherent Core Versus Non-Core Holdings Distinction

Thematic investments often focus on non-core holdings. Those may include companies that could stand to benefit from trends less entrenched — such as blockchain or renewable energy. Meanwhile traditional strategies tend to overweight core holdings, which favor more established companies with proven results.

This differentiation is critical to properly aligning investment goals with what one should expect in terms of returns and tolerance for risk. Thematic investing tends to be based on non-core holdings, leading to exposure to innovative sectors, though it requires a discerning eye on market evolution and relevance continuation.

Volatility vs. Concentration Risk

Thematic investments are more volatile, focused on specific themes, creating concentration risk tied to particular trends. As market sentiment shifts, this leads to asset value fluctuations. Traditional approaches provide some protection by investing in a variety of sectors, reducing large fluctuations and offering less downside risk, while providing more stability, if not as aggressive performance. This balance allows you to customize risk exposure.

Diversification Benefits

Thematic investing creates diversification opportunities through themes like artificial intelligence and sustainability, exposing investors to emerging growth fields. Traditional strategies focus on stability, diversifying across industries, and offering a safer route for lasting growth.

Thematic Funds: Active vs. Passive

Within thematic investing, you can have active or passive fund types. Active funds amplify returns through expert insights but often involve higher fees and require trusting the manager’s judgment. Passive funds track indices reflecting a theme, providing a low-cost way to gain exposure without active management. 

Offering thematic ETF investment solutions, passive funds give investors exposure to emerging trends at a lower cost compared to active funds. While they track the market’s performance, they don’t allow active adjustments. Which option you choose depends on your goals and comfort with fee structures and returns.

The Global Investment Landscape and Thematic Investing

Thematic strategies can have longer-term impacts, positioning you to benefit not from near-term volatility but from global trends as they manifest. Thematic investing is framed by long-term structural changes and monetary policies.

Evaluating Worldwide Trends and Structural Transformations

Thematic investing focuses on trends shaping the future economy, including technological, demographic, and behavioral changes. Investment managers examine these patterns and how they mold market dynamics, enabling funds to pursue opportunities traditional strategies may miss.

Balance between Monetary policy and geopolitics

Thematic strategies are impacted by monetary policy and geopolitical events. Rates, inflation, and government policies drive how thematic investments perform. Geopolitical factors, such as trade disputes, may also affect these strategies. Asset managers must navigate these factors to match assets with macro-economic conditions.

How Thematic Funds Are Managed

Global thematic funds require a unique management style. Themes are chosen, and asset classes aligned with those themes make up the portfolio. Managers continually adjust to new information and sector changes. For example, ETFs help avoid being stuck in outdated trends. Such approaches require thought and skill, balancing thematic objectives with economic returns.

Frequently Asked Questions

If exploring thematic investing vs. traditional strategies, it’s important to understand their differences and benefits. This section addresses frequent inquiries to help you make informed financial decisions.

What is thematic investment, and how is it different from traditional investment approaches?

Thematic investing focuses on particular trends or themes, such as technological innovations or demographic changes. Alternative strategies, by comparison, tend to be more focused on asset classes or industry sectors. Thematic investing also lets investors connect their holdings to personal values and future expectations.

What are the Pros and Cons of investing in thematic funds?

Advantages include staying ahead of rising trends and investing aligned with personal principles. There is a risk of higher volatility, and predicted trends may not occur. Assessing each theme is essential.

Who would be a good candidate for thematic investments in their portfolio?

Thematic investments may appeal to investors who are passionate about certain trends and who are comfortable with the possibility that their investments could fluctuate in value. Investors who are keen to diversify judiciously beyond familiar sectoral frontiers, too, can emerge as winners if they add thematic funds in their portfolio. That said, it is vital — or at least valuable — to be partly familiar with the themes you’re investing in.

How do thematic investing and impact investing typically perform?

Market themes are different from thematic investing which is a broader class of trends, and impact investing which is focused on social and environmental impact. Returns depend on execution and market behavior, but theme-driven investing is not necessarily positive in society.

What are some popular themes in thematic investing?

These could be sustainability, artificial intelligence, renewable energy and aging population. These topics also signal emerging global trends and changing social priorities that are creating opportunities for investors with an eye toward long-term and well-rounded themes.

What should investors think about when looking to balance a portfolio with thematic and traditional investment strategies?

Combining thematic and traditional approaches provides trend exposure with stability. Consider your risk tolerance and investment goals for a balanced portfolio that meets both short- and long-term needs.

In conclusion

The choice between thematic investing and traditional strategies depends largely on an investor’s goals, risk tolerance, and outlook on future trends. Thematic investing offers the potential for high returns by focusing on long-term global trends, while traditional approaches emphasize stability and fundamental analysis. Both strategies can play a valuable role in diversifying a portfolio, and understanding their differences allows investors to make informed decisions based on their unique financial objectives.

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Global Trade Daily

How Financial Translation Improve Global Investor Confidence

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Globalization is indeed an exciting journey. While expanding to new regions, you interact with diverse audiences, boost your skill sets, improve communication, enhance your brand’s image, and a lot more. But many businesses fear tapping into multilingual markets. They get afraid of the distinct compliance requirements, especially in the finance sector, and lose their confidence in transcending across regions.

Financial translation services play a crucial role in allowing global investors to capitalize in the international marketplace confidently. By getting clear and precise information about all the financial prospects of the target company, investors are likely to make a deal and get ready to invest. Moreover, translation allows companies to effectively communicate with their audiences, sharing a detailed overview of the current financial situation. 

The Role of Financial Transparency in Investor Confidence 

Investors have to assess their prospects of success before making investments. While investing in the international market, they become more conscious. Clear and precise financial documentation in their native language helps them make informed decisions about resource allocation. When financial information is presented with transparency, investors get a better insight into the company’s performance, understand the potential risks, and evaluate its long-term visibility. 

Moreover, detailed financial reports show the company’s commitment to accountability grabs the attention of global investors, and they are likely to capitalize on your company. However, for global companies, adapting their financial documents for a multilingual audience is a challenging and complex process. Though these documents usually contain industry-specific jargon, nuanced data, and technical terminology, you are required to get assistance from a professional translation company.

How Financial Translation Ensure Accuracy

Financial translators don’t just convert words from one language to another; they are professionals with industry-specific expertise and have a strong grip on the target region’s linguistic and cultural nuances. Their experience specific to finance, accounting, and legal frameworks makes them a suitable and reliable source of translation.

While going global, you might need to translate your documents into multiple languages. Other than translation, you will also need to meet the specific standards and regulatory requirements of each market. Different countries have unique financial practices, compliance standards, and reporting formats. Considering all these aspects while translating documents is called localization. To put it another way, it is the process of modifying content to align with the local customs of the intended audience. Adapting financial documents to the investor’s preferences increases the chances of getting leads from them. 

  • Enhancing Compliance and Mitigating Risk 

When it comes to financial operations, especially while dealing across borders, a minor mistake can disturb the whole scenario. Mistranslation of financial information can lead to misunderstandings and inaccuracies that directly impact the image of your company. Moreover, these errors can also be costly, resulting in legal disputes or financial penalties. Translation services help in mitigating these potential risks associated with misinterpretation and secure your relationship with investors.

Building a Reputation for Reliability and Transparency

  • Consistency in Financial Reporting

Presenting financial reports to diverse audiences increases the chances of inconsistency. Professional translators ensure consistent and accurate translation of documents across languages. They make sure that the information is delivered to all members associated with them, regardless of the language they speak.

  • Improving Investor Relations

Translation helps you improve investor confidence in your company’s finances and fosters better understanding and more robust relationships. Investors rely on transparent and straightforward financial information to make investment decisions.

Examples of Key Documents That Benefit from Financial Translations

  • Annual Reports and Financial Statements 

Annual reports and financial statements are significant papers. They give an overview of a company’s financial performance over the preceding year. The accurate translation of these reports allows investors from various linguistic backgrounds to fully comprehend and assess the information, resulting in more informed decision-making.

  • Prospectuses and Investment Proposals

These documents are powerful tools that attract new investors and provide them with insights into the company’s growth potential. Moreover, these documents outline financial projections, growth plans, and business strategies. Clear and precise translation of these documents is essential for conveying the company’s vision, stability, and financial outlook to potential investors with diverse backgrounds.

  • Press Releases and Earning Calls

Such documents are used to keep the global audience updated with the company’s latest developments and financial results. Press releases cover the financial results announcement part, including product launches, quarterly earnings, and strategic initiatives. Earning calls, on the other hand, provide detailed information about the company’s current financial performance.

Choosing a Financial Translation Provider for Investor Relations

  • Qualities to Look for in a Translation Service

It is obvious that you will be looking for a financial translation company, but do not forget to ensure that they promise the accuracy of your financial reports. Confirm one more thing: the translators are well aware of the regulatory standards of target regions.

  • Ensuring Confidentiality and Data Security

Though financial documents contain confidential information about your company, make sure to pick certified translators for the task. You can confirm this by checking their ISO certifications before sharing any data with them. 

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Archives, Global Trade Daily, International Trade

Foreign Direct Investment (FDI) and Supply Chain Disruption: Key Takeaways From the 2nd Quarter

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There was a jump in foreign direct investment (FDI) activity in the second quarter. While COVID-19 restrictions remain a factor, business is picking up at an extraordinary velocity as companies spend the cash they’ve had sitting on the sidelines for their industrial expansion projects. At the same time, supply chain issues continue to plague international businesses, and filling open job positions can be a daunting task in the U.S. In other words, the second quarter was a wild ride for international businesses.

Those are a few takeaways from our conversations with dozens of business leaders from Taiwan, Singapore, Vietnam, China, Brazil, Germany, Austria, Italy, the U.K., and other countries around the world. The focus of those conversations has been navigating FDI and supply chain disruption. Below are some of the main trends we are seeing and examples of how companies are adapting.

FDI Trends

The level of FDI inquiry we received in the Southeast U.S. last quarter was enormous, including in areas such as electric vehicles, pharma, food, and consumer products. In the Southeast and more broadly, there has been an increased focus among foreign investors on acquisitions as the method of FDI. There is certainly an appetite for that among businesses looking to be sold, as valuations are high, and the multipliers paid can be significant.

An international company we talked to, for example, is considering acquiring a company in the Carolinas and then coupling it with a greenfield expansion. That kind of coupling is a trend we have seen, although there may be a delay between the acquisition and the ensuing expansion. We have also seen an uptick in acquisitions by European and U.S. companies that are backed by Chinese investors.

While multi-national ownership is not a new phenomenon, tighter U.S. trade and investment regulations have been implemented over the last few years. These regulations apply to all foreign-owned companies and require consideration. For example, business leaders and their advisors need to consider the potential impact on the transaction of requirements under the Committee on Foreign Investment in the United States (CFIUS), which has the authority to block, impose mitigation measures, or unwind transactions that could impair U.S. national security. Likewise, foreign ownership or foreign nationals may also impact a company’s need to evaluate and comply with export, immigration, and other U.S. regulations.

We also have seen in Q2 continued focus in Washington on enhanced U.S. content requirements. Companies should consider U.S. content requirements, now existing and those under consideration. There has been an increasing awareness of the risks manufacturers face tied to changing content requirements in the U.S. Two examples: the Federal Acquisition Regulatory (FAR) Council is scheduled to develop new “Buy American” regulations in July under an executive order from President Joe Biden, and it is expected that if an infrastructure package gets through Congress, it will include a variety of Buy American requirements.

In addition, foreign investors are often finding it hard to find qualified workers in the U.S., just like many American businesses right now. The pre-pandemic solution for that – bringing in your own team from another country – is challenging due to U.S. visa regulations and because of travel restrictions that remain due to COVID-19. In some parts of the world, consulates have been shuttering services again, making it difficult to secure the visas international businesses need to send their expat teams to the U.S. Moreover, quarantine requirements here and abroad continue to dissuade travelers, including requirements for those who have been vaccinated. A global executive overseas recently told us, “What businessperson can really spend a week or two out of pocket [in quarantine]?”

Supply Chain Disruption

Supply chain disruption continues to be a big struggle, including shortages of materials. We continue to help clients navigate the legal aspects of that, such as whether they can claim force majeure to manage contract risk (more detail on that here.) Operationally, businesses have continued to see huge increases in shipping costs combined with difficulty finding space on container ships or getting the containers out of the port. One executive told us even if his company offered to pay double the freight cost, it wouldn’t make a difference – there was no space on any ships.

International businesses continued in Q2 their steps to address many of these challenges. Whether you call it Onshoring or Reshoring, many companies are, when cost-effective in their industry, looking to shorten the supply chain, increase U.S. content, and add supplier redundancy.

For example, a European company we talked about within the second quarter is shifting its U.S. operation so the base product can be produced in the USA in addition to Europe, thereby providing redundancy to supply and a “U.S. made” product. In this case, the company is licensing the production to a third party that will produce and supply the U.S. subsidiary. We are hearing other examples of this kind of onshoring, which can be helpful both in terms of supply chain disruption and U.S. content requirements.

Final Takeaways

While the coronavirus pandemic is far from resolved globally, progress in the U.S. against the virus is already leading to enormous FDI activity. The continuing supply chain disruptions may also be contributing to the level of FDI activity, as companies have had time to learn lessons and adjust their strategy in ways to manage the current challenges and plan for the next unexpected event. The exact speed and depth of those adjustments will come further into light through the rest of this year.

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Al Guarnieri, Sam Moses, and Michael Chen are attorneys in Parker Poe’s Manufacturing & Distribution Industry Team. Al and Michael are based in Charlotte, North Carolina, and Sam is based in Columbia, South Carolina. They can be reached at alguarnieri@parkerpoe.com, sammoses@parkerpoe.com and michaelchen@parkerpoe.com.

Spinnaker Investment Group
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Andrew Krongold Named Partner at Spinnaker Investment Group

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Vice President of Investments Andrew Krongold has been named partner in Spinnaker Investment Group, announced company CEO and Chief Investment Officer Morgan Christen. Krongold joins Christen and company president Joseph Stapleton as partners in the seven-member firm, which has more than $330 Million in assets under management.

Krongold has served as Vice President since the firm’s launch in 2016, providing CFO-level services for businesses and individuals such as customized investment management, life insurance, pension plans, and executive compensation solutions. At Spinnaker he provides leadership on the firm’s investment committee and guides marketing and technological innovation efforts.  He holds numerous licenses and professional designations, including Chartered Retirement Planning Counselor.

“We are proud to welcome Andrew as an equity partner of Spinnaker Investment Group,” Christen said.  “He is one of the big reasons we have been named among Orange County’s fastest-growing companies for two years in a row.  Andrew not only continues to provide his clients with world-class financial services but also is a valued community leader making a difference in Southern California.”

Krongold developed a passion for investments and teaching others about investing at an early age. He made his first stock purchase at 13 and chose wealth management as a career path soon after graduating from high school.  “As a kid I was fascinated with the idea that you could buy a piece of a large company,” he said.

Trading stocks and managing 401k plans early on provided great perspective on the highs and lows investors experience, he added.  “Having personally experienced the emotions associated with both making and losing money, I knew I wanted to join a firm that was independent and focused on the needs of clients, rather than be obliged to sell the financial products offered by a large institutional firm,” said Krongold.

Andrew is active in the community of Orange County where he is a mentor with Big Brothers Big Sisters of Orange County, a Board member for the NextGen division of the Jewish Federation & Family Services of Orange County, and a board member of the Tocqueville Society of Orange County United Way. In 2019, Krongold was named one of “40 under 40” by the Irvine Chamber of Commerce, in recognition of his accomplishments and service.

A graduate from the University of California San Diego with a Bachelor of Arts degree in Economics, Krongold and his wife are residents of Costa Mesa, Calif.

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About Spinnaker Investment Group, LLC:

Spinnaker Investment Group, LLC is a privately owned, boutique Investment Company that cares deeply about its clients and is committed to helping them realize their financial independence.   The company’s mission is to deliver the highest level of comprehensive wealth management service, helping customers achieve their financial goals and ultimately establish a safe, secure future.   With more than 30 years of combined investment experience, the Spinnaker team supports this mission by providing expert financial planning, wealth planning, retirement planning, asset management, securities and insurance.  For more information, visit www.SpinnInvest.com.

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How AI can Amp Up Thematic Investment Strategies

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One of the persistent criticisms facing equity investors is their short-term view. They are characterized by adding or dropping stocks as the quarterly earnings roll in. Thematic investment, on the other hand, provides one counterpoint to earnings-focused stock picking.

Thematic investing  – a strategy designed to capitalize on broad economic or social changes – has seen increasing use in recent years. In 2016, thematic funds accounted for 30% of new ETFs introduced, on topics ranging from obesity, millennial consumption habits, and health and fitness.

Yet, asking questions about anything long term can be complex and often obscure. The trends and themes themselves that will reshape economies may be easy to identify, but translating them into quality investment vehicles is another matter. Using themes like clean energy, disruptive technologies, aging populations, or emerging markets to structure portfolios comes with its own unique challenges: successfully sifting genuine long-term trends from flash-in-the-pan fads – and critically, doing so early – is no easy task. Good analysis requires a massive amount of diverse data that, once structured in a way, it would facilitate thematic analysis.

A Knowledge Graph-based framework is uniquely positioned to provide both the data and analytic framework, with the inference capabilities necessary to provide actionable insights into large data sets.

A properly built Knowledge Graph describes the interrelations between real-world entities through a multidisciplinary, multidimensional correlated structure, comparing common themes and concepts across hundreds of millions of data assets over several years of correlated data embedded into the Knowledge Graph.
Such a framework can automatically calculate thousands of strategies for any investable concept an investor can think of – ranging from sustainability themes like clean energy to disruptive technologies like 5G or cloud computing.

A functional Knowledge Graph can rapidly build new, flexible strategies for thousands of concepts, deriving insights from millions of combined sources, and in ways that a typical analyst approach cannot match. Data sets can have global coverage – with strategies tailored to and applicable to multiple regions and countries – while also being highly specialized. They’re equally capable of taking in structured and unstructured data sets; everything from news reports, SEC filings, and financial or macroeconomic reports to court opinions and clinical trial data or patents. This multidimensional approach powers a dynamic point-in-time Knowledge Graph framework to produce exposure indices with precision.

Knowledge Graphs can further offer special insights in building a thematic investing portfolio through the way they look at concepts, both – quantitative (AAPL stock prices or its fundamental indicators for example) and qualitative. This offers not only the numbers behind what makes a wise investment, but also the context behind those numbers, which is especially critical when tracking themes.

Taking that capability a step further, it can also weigh data points based on the strength of their correlation to a given data set, or screen against undesirable exposure that might at first glance appear to be on theme. This scoring can be done at the entity level, offering sourced data on every point used in the process. When the process is complete, the final index that is produced has been weighed on multiple levels, accounting for variables such as market caps and liquidity for each company, and the aggregated exposures.

This type of analysis illustrates one of the key strengths of thematic investing: its concentration. Thematic investments are typically concentrated on a smaller selection of stocks but a Knowledge Graph framework offers the opportunity to build thematic strategies based on a larger constituents basket. This pushes market analysis away from being a purely reactive prospect; through identifying anticipated changes in the world, investors can take a forward-looking approach to capitalize on opportunities as they are forming, leading to potentially greater long-term growth opportunities.

Contrast that approach with mutual funds, which are typically concentrated on 40-80 stocks in a portfolio. The emphasis is generally on diversification, which manages risk, but is not necessarily the optimal way to achieve growth.

Some funds have already begun to turn to technology to do some of this critical analysis work. The AI-powered International Equity ATF (NYSEArca: AIIQ) has been doing just this since 2018. The fund runs on the Equbot Model, a proprietary algorithm that compares and analyzes data points and international companies on a daily basis to find and optimize portfolio exposures.

With a properly designed framework, a Knowledge Graph’s AI-based exposure engine can draw inferences to understand the dynamic market trends constantly driving returns while promoting concepts investors feel strongly about. Properly deployed, AI-based thematic investment strategies can instantly create new strategies or power existing ones – and in a fraction of the cost and time that traditional analysis could yield.

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Ruggero Gramatica is founder and CEO of Yewno, innovator of the Knowledge graph that generates actionable knowledge from today’s vast information. Yewno has created an extensive multi-domain knowledge graph using proprietary AI algorithms, combined with a multi-disciplinary technology platform that extracts insights and delivers products and services tailored to specific industries. Yewno generates actionable knowledge from the ever-increasing amount of information available today.

As a pioneer in the Knowledge Economy and the innovator of the proprietary Yewno Knowledge Graph, an artificial intelligence-based framework powered by billions of disparate data sources, Yewno provides continuously evolving inferences that uncover unexpected insights for financial services, education, life sciences, government and beyond.  By delivering more meaningful intelligence, Yewno is revolutionizing how information is processed and understood, enabling users to more quickly analyze complex problems and improve decision-making. For more information, visit https://www.yewno.com/.

Archives, Commentary, Global Trade Daily

How Millennials Are Changing The Investment Game

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Millennials are on the verge of becoming big players in the investment field.

Baby boomers, according to Forbes, are about to pass an estimated $30 trillion in assets down to millennials within the next few years. This generational transfer of wealth gives millennials many options on investing — starting with the investment firms they choose.

Understanding millennials’ mindset on investing and, just as importantly, learning their personality traits, preferences and dislikes, are crucial to any investment firm seeking to help them allocate their assets. For starters, millennials’ approach to investing is distinct to previous generations, and they handle money and choose the people who they entrust with that money very differently, too.

Those factors will have several ramifications for how assets are allocated in the next three, five, 10, 20, and 30 years. That’s why discovering how to connect with millennials so that they feel confident enough to trust you with their funds is critical.

How do millennials differ from previous generations, including their investment approach? Here are some revealing distinctions:

They’re more entrepreneurial. Whereas their parents, baby boomers, valued job stability and scaling the corporate ladder, millennials are more inclined to build their own businesses and take greater financial risks. They’re confident that even if they lose some money, they can earn it back — facts firms should consider as they approach this generation and brainstorm investment solutions.

They’re wary of Wall Street. After the Great Recession, many millennials were forced to take on student loans because their parents couldn’t afford college tuitions. So if they’re not entirely warm to the idea of Wall Street, what do millennials trust? Where do they see themselves putting the $30 trillion they’ll one day inherit? This group of investors favors commodities and options and they’re also more likely to put money in exchange-traded funds than their baby boomer parents.

They’re impassioned about helping the world. Millennials want to serve a greater purpose to humanity. This common trait has given rise to the concept of “impact investing” — intentionally putting money in companies or organizations that offer a financial return but also contribute funds toward creating a positive social or environmental impact.

They often don’t trust advisors. According to a study, 57 percent of millennials don’t trust advisors, believing they’re in it more for self-serving purposes than for their clients’ best interests. What they want is someone who wants to build a relationship with them and works toward gaining their trust.

So knowing how millennials and their investment thoughts are unique, how should investment firms navigate this young crowd of investors and best position themselves to reap the business of this generation, both today and in the coming years? 

Create trust and be transparent. Investment firms can build a foundation to better serve the millennial generation by fostering relationships, customizing your advice, and being clear about fees. For example, millennials, unlike baby boomers, prefer flat fees over commission-based pay models; that’s what they’re most familiar with through the advents of Uber and Netflix.

Explore technology. Millennials like technology but they also like simplicity and convenience. Look for ways to leverage technology to make experiences simpler, more self-serving, and more convenient for millennial users. Robo-advisors and digital investment content platforms and tools are just the start of the options available to explore. If they find it inconvenient or complicated to do business with you, they’ll do it with someone else.

Be a great communicator. While technology and self-service drive them, millennials also appreciate a human touch in the investment space, meaning a hybrid of tech and human would be the ideal mix for them. Find out how your millennial client likes to communicate — by text, email, messaging via a digital investment content platform, or on the phone. And when you are communicating, remember to be an advisor, not a dictator. Millennials appreciate insight, but they still like to be the one controlling decisions that impact them.

Use data to customize recommendations. Track clients’ online activity to gather data about them and use this in conjunction with their personal preferences to send them customized investment ideas, alerts, and recommended products.

It comes down to this: Millennials and baby boomers are as different as rotary phones and text messages, and newspapers and podcasts. And they’re just as varied in their viewpoints of success and allocation of material wealth.

Therefore, if advisors truly want to stay relevant in the investment game, they’ll have to work hard to build rapport with this generation and show good will to retain them as clients both currently and into the future.

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Gui Costin (www.guicostin.com), author of the No. 1 Bestseller Millennials Are Not Aliens, is an entrepreneur, and founder of Dakota, a company that sells and markets institutional investment strategies. Dakota is also the creator of two software products: Draft, a database that contains a highly curated group of qualified institutional investors; and Stage, a content platform built for institutional due diligence analysts where they can learn an in-depth amount about a variety of investment strategies without having to initially talk to someone. Dakota’s mission is to level the playing field for boutique investment managers so they can compete with bigger, more well-resourced investment firms.