It is believed that the millennial generation, born between 1982 and 1994, often get a bad rap in the financial advice space for being over-confident, mistrusting and obsessed with technology, but a new research study sponsored by the CFA institute and the FINRA Investor Education Foundation puts into question these beliefs and challenges us to think of this demographic in new ways.
The research, titled “Uncertain Futures: 7 Myths About Millennials and Investing”, provides valuable insight into the thoughts and financial behaviors of this under-served market.^
Let’s touch on three oft-repeated misconceptions about millennials:
Myth 1: Millennials Think They Already Know Everything
While it may be true that millennials on whole, have access to a dizzying plethora of robo-advising tools and are often assumed to be quite skilled at performing basic investment research, many may feel that they lack the financial knowledge necessary to navigate changing markets over time.
Yes, they have access to facts and figures, but they seem to often recognize the need to have someone who will help them invest wisely and in accordance to their own belief systems. The study says that millennials often seek out guidance as to how to better support organizations and causes which mirror their own beliefs about things like social responsibility and sustainability.
Christine Young, a millennial, Ivy League law graduate and Director of Business Strategy for TradePMR (a custodial services provider dedicated to serving registered investment advisors (RIAs)), says of her generation:
“I believe, because we all grew up during the 2001-2008 recessions, the value advisors can provide to us millennials is not just making sure we are investing our savings to meet our goals, but importantly, to make sure we stay the course during market downturns rather than selling at the bottom or taking an approach that is too conservative.”
Further support that millennials don’t really think they “know it all” might also be interpreted from the study’s finding that 46% of millennials with investment accounts said they were inspired to invest by their parents and family. It appears that millennials are not only actively seeking financial advice, they may often be accepting that advice from their parents, who might already be your clients.
Myth #2: Millennials Only Want to Use Robo Advisors and Technology Tools
Many RIAs assume that because millennials are tech-savvy, they don’t recognize the value that an experienced, professional RIA provides, but data gathered from the study reveals that despite their affinity for technology, 58% of millennials prefer to work face to face with a finance professional. (According to the study, that figure is on par with Baby Boomers (60%) and Gen Xers (58%).)
How many times have you opened an e-mail or read the news and found yourself alarmed by dire warnings that millennials are killing the financial advisement industry with their excessive use of robo tools? You might be relieved to know that according to the study, only 16% of the millennials surveyed expressed a strong interest in using robo-advisers.
“But don’t millennials prefer robo advisors because they don’t trust human financial advisors?”, you might ask. Actually, only 15% of the millennials who participated in the study said that lack of trust was a barrier to them working with a financial advisor.
According to the study, many millennials are likely open to the idea of working with you. The question is, are you willing to work with them?
Myth #3: Millennials Don’t Have Enough Assets to Hire an RIA
While it’s true that many millennials are still in the accumulative phase of asset building, many of them have completed advanced schooling and are earning respectable incomes in a wide range of fields including law, technology and healthcare. This, combined with the fact that an approximately 75 million millennials are positioned to inherit an estimated $35 trillion in wealth from baby boomers, make them a demographic worthy of your time and attention.*
This generation, it appears, is also beginning to invest at a younger age than the previous generation, sometimes even before the age of 21. They seem to have embraced the idea that you should start saving for retirement as soon as possible but they may often lack an expert’s direction on how to do so wisely.
As an RIA, how can you use these valuable insights to better serve this market as well as build your business?
You might begin by thinking of ways you could alter your business model to better serve the millennial demographic. Instead of charging on the basis of asset under management, perhaps a monthly fee model or other creative compensation model might be worth exploring (keeping in mind a reasonable fee structure). Since many millennials seem to have misconceptions about how much it costs to work with a financial advisor (77% of millennials in the study believed financial professionals charge 5% or more of AUM), an investment in targeted advertising which corrects this assumption could go a long way toward generating new leads in this demographic.
After all, an investment in this next generation could also be an investment in the future of your business.
^ To read the study in its entirety, visit: http://www.finra.org/newsroom/2018/cfa-institute-and-finra-foundation-study-debunks-common-myths-about-millennials-and (October 4, 2018)
*https://money.usnews.com/investing/articles/2017-07-18/will-millennials-be-ready-for-the-great-wealth-transfer (July 18, 2017)
Securities offered through Trade-PMR, Inc., member FINRA/SIPC