Close Close

Financial Planning > College Planning

How Advisors Can Reach Tech-Savvy Millennials

Your article was successfully shared with the contacts you provided.

What do financial advisors and millennials have in common? They’re both misunderstood. In an attempt to dispel these misconceptions, many financial firms are taking note of the investment needs of millennials and employing strategies to attract young investors.

The Next Generation of Investors

Findings from recent surveys contradict the widely held view that millennials are a generation defined by entitlement, instant gratification and disengagement with the real world. On the contrary, millennials–loosely defined as the age group born during the early 1980s to early 2000s–are focused on the future, have a strong sense of social responsibility, and are financially conservative.

According to Wealthfront, an automated investment service, this fiscally responsible generation has an aggregate net worth of more than $2 trillion, which is expected to continue to grow to $7 trillion by 2018. This generation also stands to inherit nearly $36 trillion by 2061, according to a study from the Boston College Center on Wealth and Philanthropy. With such a huge generational shift in wealth ahead, it’s increasingly important that financial advisors prepare to serve the needs of the next generation of investors.

Trust Issues

Serving the financial needs of millennials is easier said than done. This generation is significantly different from their parents and grandparents. This is evident in their use of technology, their social and cultural views, and their attitudes toward financial advisors and how they invest.

According to a UBS Investor Watch survey, 40% of non-Millennial respondents said they are likely to seek advice from a financial advisor when making fiscal decisions, whereas only 14% of millennials said they would do the same. According to the survey, millennials are most likely to seek financial advice from their spouse or partner (62%), their parents (41%) or their friends (26%).

In fact, most millennials have a hard time putting their investing decisions in the hands of others. Around 72% of respondents in a recent Merrill Lynch survey described themselves as being “self-directed” in their investing, meaning they do not consider themselves dependent on an advisor. Around 41% report that they do not have a financial advisor of any kind.

One reason for the skepticism of the financial services industry comes from the financial crisis of 2007-2008 and the slow economic recovery that followed. These events left negative impressions on millennials, specifically in regard to firms commonly associated with Wall Street. As a result, many millennials have a hard time believing that financial advisors have their best interests in mind. According to the Merrill Lynch survey, only 19% agree with this notion.

“Based on our conversations, millennials seem to equate financial advisors with salespeople, and remain unaware or unconvinced of the industry trend toward a fee-based approach in which advisors’ fees are not based on how many trades they execute, but on the size of the portfolio and its growth,” Michael Liersch, director of Behavioral Finance at Merrill Lynch, said in the report. “As a generation intently focused on the value-add of almost every service or product they buy, millennials simply seem to question whether paying for financial advice is worth it.”

It’s Not All About the Benjamins

Not only do millennials have a different attitude toward the financial services industry than earlier generations, but they also tend to have very different ambitions when it comes to investing. For this generation, wealth doesn’t necessarily equate to success. A philanthropic cause or an entrepreneurial venture is a worthy investment; millennials measure success in part with things that provide a sense of purpose.

According to a Merrill Lynch survey from 2012, 60% of the youngest generation listed “social responsibility” as one of the most important factors by which they selected investments. This is a much higher percentage than that found in older generations.

Social responsibility is an idea that seems to be instilled in the DNA of millennials. Two movements, “values-based investing” and “impact philanthropy,” are increasingly popular with the generation. Values-based investing is a process that identifies important personal values and principles, and includes companies that reflect these values in one’s investment portfolio. Impact philanthropy is a way investors can make a social impact while also achieving a financial return. For example, investors can put their money in a non-profit venture fund that uses entrepreneurial approaches to solve social problems, like poverty, and expect a financial return.

An Evolving Industry

Many wealth management firms have taken note of these generational characteristics and adjusted their business approaches accordingly. For example, firms are increasingly finding ways to address the demand for more socially responsible investments.

Personal Connections

Many firms realize that millennials value personal connections and access to certain products and services not available elsewhere. This doesn’t only pertain to financial advice.

“The financial advice piece of it is almost a given,” said Adam Katz, an advisor with the Private Banking and Investment Group at Merrill Lynch. “They assume you’re going to be able to help protect and grow their assets. What they’re really seeking are connections to people or to expertise that might help them with their livelihoods or with their businesses,” Katz said. For example, they might want to be able to access capital through a business loan from the firm’s affiliated banking operations, or get an introduction to an investment banker who might be able to help broker the sale of their company someday.

Technology Interactions

Another way advisors are working to address the investment needs of millennials is to offer less face time and more interaction via technology such as phone, email or video chat. As a tech savvy generation, millennial investors expect their financial advisors to be easily accessible through these methods. When it comes to marketing and education, advisors who want to reach this generation will need to embrace technology.

Financial firms have also employed other strategies to reach this generation, such as training more new college graduates to be financial advisors, offering investment educational programs aimed at clients’ children, and building online programs to teach students investing strategies and how to use trading platforms.

“Firms have realized they can no longer push advice and products from the top down, from institution to client,” Merrill Lynch’s Liersch said in the report. “The advice must arise from the other direction, from the bottom up.”

As a result, investors are more in control than ever before. Firms that recognize this, and evolve to address the needs of the young generation, are bridging the gap between the financial advisor and the millennial investor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.