How Millennials, Gen Xers View Wealth Differently

As wealth ownership in the U.S. shifts to millennial and Generation X investors, it is incumbent on financial advisors and providers to understand how these investors want to engage with financial professionals and comprehend their attitudes and preferences regarding financial matters.

In a new report, Spectrem Group lays out key differences between millennial and Gen X investors and highlights some of the unique characteristics of investors in each generation. 

Top 14 Advisory Services Clients Want, but Aren't Getting

Millennials have different attitudes than Gen X investors toward wealth accumulation and about how they feel about the wealth they have accumulated.

Spectrem fielded the research over the summer among 601 millennials and Gen Xers, all of whom had at least $100,000 in net worth, not including their primary residence, and were the household financial decision-maker or shared jointly in making household financial decisions.

Millennials vs. Gen Xers

The research showed that millennials value hard work and are proud of their wealth because they feel they earned it. At the same time, they are uneasy about their success.

Millennials in the study were nearly twice as likely as Gen Xers to feel guilty about their wealth. Spectrem noted a likely reason for this: 76% of millennials considered wealth inequality in the U.S. a major problem, compared with 57% of Gen Xers.

This belief, in turn, may affect how they invest, leading to choices influenced by social and political inspirations and not just prudent financial guidelines.

Unlike Gen Xers and older generations, most millennials in the study reported that their parents had worked with a financial advisor. While they are comfortable with the idea of using a financial advisor, their expectations of the services they are paying for differ from those of their older cohorts. 

Eighty-two percent of millennials said they use an advisor to assist them in making financial decisions, compared with 65% of Gen Xers. The types of advisors they seek out are different from older investors. Millennials consider a banker or an accountant their primary advisor, whereas Gen X investors are more likely to use independent financial planners, full-service brokers and investment managers as their primary advisor. 

Spectrem said banks have an opportunity to invest in the technology and services they provide to retain these younger investors over the next two decades.

Investment management is now an expectation surrounded by other more holistic financial advice. Both millennials and Gen Xers consider investment management the most important service an advisor provides. In addition, nearly half of Gen X investors also want an advisor to provide planning, compared with 42% of millennials. 

Gen X investors are also far more likely than millennials to want retirement planning services and tax planning advice.

Spectrem’s research showed that younger investors are more likely to use many different apps for both wealth management and trading, which may bring wealth management into focus for them at an earlier age than their older counterparts. 

The communication preferences of millennials and Gen X investors require financial advisors to look critically at how they communicate with their clients on various topics. What advisors may perceive as important may not be as important to the investor, according to Spectrem. 

Consider that millennials prefer a phone call for a general question, a text regarding financial planning and video chat or email for retirement planning and tax questions. Gen Xers also prefer the phone for general questions, but want emails for performance reviews and distributions from their account.

Although their overall portfolios are similar, millennials are much more interested than Gen Xers in new types of investments, including nonfungible tokens and meme investing. They are also a lot more interested in cryptocurrency options than Gen Xers. 

Spectrem noted that as younger investors include new types of assets in their portfolios, how financial advisors define appropriate asset allocation strategies will change. Advisors need to become experts or align themselves with experts regarding these new investment types.

The research also found that millennials are confident regarding their investment knowledge, but a bit naïve about inflation — many think the government will keep inflation in check, so they are not worried about it.