Looking to expand your client base? Then you better be familiar with the unique mindset and preferences of Millennials as a generation ripe for guidance and engagement, says a new report.
Coming of age in the wake of 9/11, the 2008 market crash and the Great Recession, Millennials’ financial concerns, investing habits and future earnings potential was shaped by these events, leading them to proceed with caution and have an aversion to risk, according to Nationwide Advisory Solutions’ fourth annual Advisor Authority study.
A special report from the study takes an in-depth look at Millennials (ages 18 to 37) with investable assets of $100,000 or more, to profile the needs of this expanding market and how they differ from their older counterparts.
Help Wanted
Millennials are just as likely as other generations of investors to have an advisor (60%). And like all generations, Millennials are most likely to say that the No. 1 reason they have a financial advisor is to make them feel more confident in their financial future (37%), according to the report.
At the same time, however, Millennials (21%) are somewhat more likely than Gen-Xers (17%) and Boomers (10%) to say they have an advisor because “they’re currently focused on financial planning,” suggesting that this generation is thinking ahead when it comes to their finances.
What’s more, given their younger age, the report notes that it may be somewhat surprising that Millennial investors are already focused on saving enough for retirement (20%), which is tied for fourth on their list of financial concerns. It was also cited as the No. 3 reason Millennials have an advisor (13%).
And given the events they witnessed when coming of age and their perception of investing for the future, Millennials (76%) are also as likely as Gen-Xers (68%) and Boomers (75%) to say they have a strategy to help protect themselves from outliving their savings.
Likewise, a majority of Millennials (53%) say they have a strategy in place to protect their portfolio against market risk. And among those who have a strategy, they are somewhat more likely than their older counterparts to rely on liquid alternatives as their top solution – at 50% versus 27% for Gen-Xers and 33% for Boomers. Millennials also are somewhat less likely to rely on traditional diversification as the foundation for risk management – at 43% versus 77% for Gen-Xers and 76% for Boomers.
They also were found to be more likely to use fixed index annuities (47%), fixed annuities (40%) and market-linked CDs (39%), and somewhat more likely to rely on advanced instruments such as put options (20%) and smart beta ETFs (16%).
Attracting Millennials
When choosing an advisor, Millennial investors – like all other generations – say experience matters most. Millennials, however, are the only generation to say that socially responsible investing is rated within the top two factors for choosing an advisor, suggesting that this generation cares deeply about where their money goes (26% versus 9% for Gen-Xers and 10% for Boomers).
Additionally, while all other generations say that serving clients using a fee-based fiduciary standard is among their top four priorities, Millennials (16%) rated it as less important than factors such as historical performance (19%), increased use of mobile technology (18%), increased use of social media (17%) and strong cybersecurity procedures (17%).
According to Nationwide, this represents a “significant departure – and important opportunity – for advisors to provide more education on the importance of finding an advisor who puts clients’ best interests first.”
And while they are the generation most familiar with artificial intelligence, Millennials who have a financial advisor still say that their preferred form of communication is face-to-face (35%), surpassing phone calls (26%), email (11%), social media (7%) video chat (6%) and text messaging (3%).
The online survey was conducted by The Harris Poll from Jan. 3 – Feb. 21, 2018, among 972 financial advisors and 827 investors. Of the 972 financial advisors, 508 were RIAs and 464 were broker/dealers.
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