Gen X and millennial investors are different from one another and different from their older counterparts, according to a special report from Nationwide Advisory Solutions’ annual Advisor Authority study published this week.
RIAs and fee-based advisors who understand their unique characteristics can compete more effectively for their business.
“The opportunity is huge,” Craig Hawley, Nationwide’s head of annuity distribution, said in a statement.
“As boomers shift into retirement at a rate of 10,000 per day, both millennials and Gen Xers are poised to grow more wealth and ultimately inherit their share of the $30 trillion great wealth transfer,” Hawley said.
The opportunity: 52% of Gen Xers and 39% of millennials still do not have an advisor, and could benefit from long-term holistic planning, according to the report.
The Harris Poll conducted the fifth annual Advisor Authority survey online within the U.S. from Feb. 15 to March 4 among 1,021 financial advisors and 824 investors: 165 millennials, 213 Gen Xers, 379 baby boomers and 67 matures.
Gen Xers and millennials often approach decision making differently, from choosing an advisor to making life choices, and often have different points of view.
Eighty-five percent of millennials in the survey said they were the primary decision maker in their household for long-term financial planning, compared with just 55% of Gen Xers. Likewise, 45% of millennial investors had never married, compared with 17% of Gen X investors.
When choosing an advisor, both Gen X and millennial respondents maintained that experience matters most, and both groups included personalized advice for a holistic financial picture among their top three considerations.
However, the factors that influence their decision to work with a financial advisor also reflect strong differences in values and priorities.
Whereas more millennials than Gen Xers in the survey cited socially responsible investing and increased use of mobile technology, fewer millennials cited a fee-based fiduciary standard among the top three factors that influence their decision to work with an advisor.
Nationwide said this latter finding may reflect an important knowledge gap, presenting advisors who are targeting millennial investors an important opportunity to educate them on the benefits of working with a professional who puts the client’s best interest first.
Optimism Belies Concerns
The survey found that 64% of millennials had an optimistic financial outlook for 2019 overall despite their outsize debt and other financial challenges, compared with 49% of Gen Xers.
The fifth annual study also showed that 47% of millennials had an optimistic outlook on the U.S. economy for the next 12 months, versus 31% of Gen Xers.
Yet, 61% of both generations expressed concern about a U.S. economic recession over the next 12 months.
Likewise, 53% of millennials but only 36% of Gen Xers had an optimistic outlook on the U.S. stock market for the next 12 months. Yet millennials were more concerned than Gen Xers about a bear market in the next 12 months.