Millennials with investable assets of $100,000 or more have needs that it behooves financial advisors to take note of if they want them as clients, according to a special report from the annual Advisor Authority Study commissioned by Nationwide Advisory Solutions, formerly Jefferson National.
“Year over year, RIAs and fee-based advisors say that adding new clients is the number-one driver of profitability, and millennials are a prime target,” Craig Hawley, head of Nationwide Advisory Solutions, said in a statement. “But this generation faces distinct challenges and fosters unique preferences — which advisors must understand in order to build productive relationships.”
Growing up in the shadow of the 2008 market crash of 2008 and the recession has affected millennials’ financial concerns, investing habits and future earnings potential, according to the study. They are proceeding with caution, and this aversion to risk may impair their ability to reach their future financial goals.
RIAs and fee-based advisors can tap into these insights to understand this younger generation and compete more effectively to win their business. The opportunity is substantial: 40% of these younger investors still do not have a financial advisor.
The Harris Poll conducted an online survey from Jan. 3 to Feb. 21, 2018, among 508 registered investment advisors, 464 broker-dealer reps, and 827 investors 18 and older, ranging from mass affluent to ultra-high net worth.
The survey found that millennials were much less likely than Gen Xers and baby boomers to have a mortgage, but much likelier to have student loans. Perhaps as a result, 31% of millennials said that managing debt was their No. 2 financial concern over the next 12 months, compared with 25% of Gen Xers and just 13% of boomers and 4% of older respondents.
Millennials may be dealing with the repercussions of their debt for decades to come, according to the study. They were much more concerned than other generations with financing a large expense and financing a home.
Taxes ranked among the top three financial concerns for every generation in the survey, but were the top concern only for millennials, and needing help managing their taxes was their No. 4 reason for engaging an advisor. They were also most likely to say that the tax overhaul passed in 2017 would increase the likelihood of their working with an advisor in the next 12 months.
Already Planning for Retirement
Millennials are risk averse and reluctant to invest in the stock market, according to the study. They are likely to hold twice as much cash as any other generation in their investment portfolios.
This presents advisors with a big opportunity to help them start early and establish a lifetime of smart investing habits to reach their financial goals.
The survey found that millennials are already focused on saving for retirement, which they rated fourth among their top financial concerns, while saving enough for retirement ranked third among their reasons for engaging an advisor.