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Industry Spotlight > Women in Wealth

Misperception of Millennials Skews Financial Advisors’ Strategies: SIFMA Panel

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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.


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.

Importantly, 40% of those surveyed did not believe financial advisors had their best interests in mind. Millennials considered financial advisors salesmen, they told Liersch and his colleagues, and were unaware or unconvinced of the industry trend toward a fee-based approach, in which the advisor’s fee is based on the size of the portfolio and its growth, not on trades executed.

According to Liersch, millennial inheritors felt especially challenged in developing a healthy relationship with money and investing. Their chief concern was sustainable wealth strategies. They wanted to avoid the “shirtsleeves-to-shirtsleeves” phenomenon, whereby a family’s wealth dissipates 70% of the time in the second generation and 90% in the third generation.

Inheritors want to be among the 10% who are good stewards of family wealth, Liersch said.


Shaffer said that her younger clients were not in thrall of money; they had a more expansive of the world.

The Bank of American Merrill Lynch survey found that millennials shared a sense of entrepreneurship. Wealth creators wanted to be able to access their money because they feel they have a long way to go. They want the flexibility to continue to be an entrepreneur.

For their part, young inheritors did not feel they needed to be richer; they wanted to do something with what they had been given.

Often this took the form of an entrepreneurial venture or a philanthropic cause; increasingly it was a combination of the two in the form of values-based investing and impact philanthropy.

An earlier study cited by Liersch found that 60% of young investors—far more than older investors—said “social responsibility” was one of the main determining factors in choosing an investment.

Tune in

So, what is important to investors in their 20s and 30s seeking a wealth management provider?

The survey found that the top attribute was an understanding of their needs. They wanted the advisor to help them develop an investment strategy that reflected their short- and long-term goals.

Also very important was an advisor’s ability to communicate in a way that resonated with them.

On this point, Steinberg said that his business had been greatly helped to grow by his partner, a man in his early 40s—17 years younger than Steinberg—who is able to talk to younger investors in a relaxed way they can relate to.

Other priorities for millennials in choosing a financial advisor, according to the survey, were values-based investing, access to products and services they could not find elsewhere and access to funding their own business.

Liersch said young investors wanted to make wise, pragmatic decisions. Advisors must listed hard to understand their anxieties and aspirations in order to help them devise a strategy to help them meet their goals.


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