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Financial Planning > Behavioral Finance

Debunking Two Pervasive Millennial Investor Myths

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There are plenty of reasons financial advisors are eager to attract millennials: They’re entering their prime earning years, many stand to inherit wealth from their parents, and in many ways, they represent the future of advisor firms.

But millennials also often spark doubt in the minds of advisors. This age group — which Time magazine calls the Me, Me, Me Generation — are typically stereotyped, in part, as people who are glued to their phones, who eschew human interaction, and who are unlikely to invest their money.

But don’t believe it, While this group has different attitudes about investing and managing money than their parents, they could be the easiest to approach and most accepting of guidance. Here we debunk key myths.

Myth #1: Millennials aren’t interested in (or don’t see value in) getting financial advice. Millennials are in fact more likely than any other generation to say that having a financial advisor they trust is important to their financial confidence. Overall, they see financial advisors as sources of sound financial advice, and partners who can help them achieve their goals.

Even those currently not working with advisors say they’re likely to start using one in the near future. Together, this makes millennials more likely than any other generation to work with an advisor.

Advisors who take stock in this myth may be mistaking risk aversion for apathy. For a positive engagement with millennials, it’s important for advisors to first understand their appetite for risk — where it comes from and how to align your guidance with it.

This age group grew up during the financial crisis of 2008 and the Great Recession that followed; it’s no surprise that across all major priorities, millennials are less confident that they’ll achieve their financial goals than their parents and grandparents were.

They’re also carrying significant student debt as they enter the workforce (about two and a half times the amount students owed 10 years ago), and this may affect their tolerance for risk. At the same time, they’ll be reaching important life milestones (buying a home, starting a family, funding their children’s educations) and therefore face more financial complexity and challenges in their lives.

Both the lack of confidence in the future and the major purchases and investments ahead of millennials represent “open doors” for advisors. Millennials can benefit from proactive financial planning and ongoing guidance, with engagements that help foster good financial behaviors and habits around saving and investing. Maximize the time you spend with them by leveraging technology to automate some of the more straightforward tasks like investment management.

Myth #2: They don’t want to interact with people. Yes, millennials are the digital generation and they access life through their devices: They connect, share, research, buy, sell and manage their money using smartphones and other technology. But millennials actually appreciate the value of in-person interactions when it comes to their finances. Nearly half of this generation say face-to-face meetings are the preferred way to keep in touch with their advisors. Surprisingly, staying in touch via texting and social media is not nearly as appealing to them.

Here’s what advisors should do: Make the most of your time with them. No other generation has been so enabled and encouraged to share their ideas, thoughts, feelings, observations, views — in other words, to be heard. They want to be valued and validated, and that’s true for their relationships with advisors, too.

The first step is to ask how he or she wants to communicate with you. Even if it goes against your typical processes, tailoring your communications approach will result in a more satisfied client. The same goes for the financial plans you present to them. Rather than assume typical templated plans will suffice, work to develop ones that reflect their passions, views of the world, lifestyles, and causes they support.

Be smart about the technology you adopt. Millennials are eager to have face-to-face meetings, but as they are “digital natives,” you can’t afford not to offer technology that makes serving them more efficient; they’ve learned they can get the information they want when they want it.

Tech-driven solutions with easy-to-navigate dashboards are key to satisfying their desire to access and manage their accounts on demand. It’s important to remember 57% of millennials, according to EFMA, say they would switch their financial services firm to one that offers a better technology platform.

Elisa Garcia is business development manager at Betterment for Advisors.


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