Representing the generation born between 1977 and 1995, millennials are taking their place in history in size and influence as the impact of Gen X and baby boomers begins to fade.
To explore the wealth advice preferences of this 83 million-strong generation, Broadridge Financial Solutions and The Center for Generational Kinetics (CGK) conducted a joint survey of 1,003 U.S. respondents this year. The results, published in “Decoding the Millennial Mindset,” uncovered some unexpected insights for financial firms looking to grow relationships with millennial prospects.
Topsy Turvy Over Risk
The most educated generation to date, millennials could be expected to know that a well-diversified portfolio that includes stocks, bonds and mutual funds is a good idea. Instead, the survey showed they prefer savings accounts over other categories. Able to tolerate greater long-term market fluctuations than Gen Xers and boomers, younger investors can assume a corrosive degree of investment risk if they miss out on the compounding advantages of long-term growth investing.
However, they really aren’t particularly risk averse. When asked about their confidence in other investments, 30% of millennials favored riskier private equity, compared with 21% of Gen Xers and 16% of boomers. Understanding the basics of investing is critical for this cohort, because they are more likely than Gen Xers and boomers to be invested in workplace retirement plans. In a word, they need portfolio guidance.
Age and Experience: Advisor Advantages
Today the average age of a financial advisor is 51 while the average millennial is just turning 30 — more than two decades of separation. However, unlike baby boomers, millennials never endured a confrontational generation gap. Rather than “not trusting anyone over 30,” they generally look at parents, teachers and mentors with respect and admiration.
Although 69% of millennials don’t have an advisor, they identified “experience” as the single-most important attribute for any advisor they’d hire.
Such experience will prove invaluable for those millennials on the receiving end of the looming $30 trillion wealth transfer from their boomer parents. Since 40% surveyed expect to receive an inheritance themselves, enterprising advisors have a reason to ask their clients for a different kind of referral: leads to their own children. For their part, millennials like the idea. While only 20% have met their parents’ financial advisor, more than half said they would consider working with the family professional on their own portfolio needs.
As millennials enter their prime earning years and tackle their vastly expanding financial responsibilities, there are manifold opportunities for firms to introduce their capabilities and engage these younger prospects. Those financial service providers who help them make their first major retirement and investing decisions now can lay the groundwork for a new, trusting and loyal client base as millennials gain wealth and influence over the decades ahead.
When asked what it would take for millennials to save more, millennials outperformed the other two generations in demonstrating energy and readiness to increase their investment commitments. Compared with only 34% of Gen Xers and 33% of boomers, 40% of millennials stated that recommendations from a financial advisor would motivate them to invest or save more.