Misperception of Millennials Skews Financial Advisors’ Strategies: SIFMA Panel

Courting millennial investors is a key challenge confronting the financial services sector.

Industry professionals on Thursday discussed what these young investors want from their financial services firms during a panel discussion at SIFMA’s private wealth conference in New York.

Michael Liersch, director of behavioral finance at Bank of America Merrill Lynch, noted that a strong misperception about millennials was that they were very different from their parents.

In fact, Liersch said, research showed that two-thirds of people born between 1980 and 1999 on average had values and approaches to investment that were similar to those of their parents. They would not only use their parents’ financial advisor, but also subscribe to a buy-and-hold investment philosophy.

Another misperception, he said, concerned their focus on technology and social media for communication. Younger investors by and large strongly prefer face-to-face meetings with their financial advisors. Technology can augment these interactions, but does not supplant them, and is among the least used sources for financial and investment information.

“Social media have not changed the business, they have changed the way we communicate its merits,” said Evan Steinberg, managing director and wealth advisor at Morgan Stanley Wealth Management.

Differences between millennials and their parents do exist, Liersch said, but these differences are subtle and complex.

Millennials are a skeptical lot; they take nothing at face value. Advisors’ experience and past performance go only so far; they want to see evidence. They want to know how they can accomplish their goals.

Nowadays, millennials approach a financial advisor after having done their research on the firm and googled the advisor, according to Sheila Spainhour Shaffer, executive vice president for wealth management at Janney Montgomery Scott.

“They’re looking for solutions unique to their situations, not cookie-cutter solutions they can find on the Internet,” Shaffer said.

Millennials’ misgivings about Wall Street and the financial services industry do not stem directly from the recent financial crisis, Liersch said. The crisis simply confirmed the doubts many already had.

Gaining, or regaining, their trust will take time.

‘Self-Directed’

A 2013 survey commissioned by Bank of American Merrill Lynch polled 153 investors between the ages of 18 and 35, evenly divided between women and men. Forty-six percent had investable assets between $1 million and $3 million; 26% between $3 million and $10 million; and 28% upward of $10 million.

Liersch said 72% of respondents described themselves as “self-directed” in their investing, and 41% said they did not have a financial advisor.

They acknowledged that financial advisors had important insights to offer, and would turn to them for advice, as well as to themselves, their spouses and their parents, for advice—but their friends not so much.

Liersch said the study found that wealth creators—entrepreneurs, high earners—in particular wanted to maintain command over their money.