If you know any millennials, it shouldn’t be a surprise.
Younger savers aren’t convinced of the value provided by financial advisors, opting instead for self-directed brokerage accounts, yet are more financially responsible than they get credit for.
A new YCharts survey, Millennial Saving & Investing Habits, finds that 53 percent of millennials (whom they define as between ages 22 and 37) manage their own investments and plan to keep it that way, demonstrating that they are very much financial “do-it-yourselfers.”
Forty-one percent have a self-directed brokerage account, while only 11 percent have an advisor-directed brokerage account.
Further, 31 percent utilize investing apps or robo-advisors, and only 30 percent of millennials who don’t use an advisor say they likely will in the future.
Millennials often get a bad rap for being poor savers, yet the data shows 44 percent save more than 15 percent of their pre-tax income, while more than half are saving at least 12 percent.
“The business model of many of today’s financial advisors is under attack,” Sean Brown, CEO and president at YCharts, said in a statement. “With the $30 trillion wealth transfer underway and financial advisors being asked to justify their fees, it’s critical to understand the needs of the millennial generation. Our data indicates that millennials are ambitious, aggressive savers, and with the current market conditions, financial advisors have a limited opportunity to demonstrate their value proposition.”
Three in 10 millennials are “somewhat” or “very nervous” about whether they’re saving enough, but even the top savers have an unrealistic view of how quickly their savings level will lead them to seven-figure wealth; 65 percent of millennials think they’ll reach seven-figure wealth by age 45 or sooner.
Despite those lofty aspirations, 37 percent of millennials currently have between $25k-100k in savings and investments, while just one-quarter have over $100k.
Given reality’s shortfall from millennials’ expectations, some financial guidance, goal-setting, and a realistic strategy to reach those goals could go a long way for millennials and their portfolios.
However, they either aren’t aware of the value of a financial advisor, or they simply don’t think traditional wealth management is worth it.
Give them a wake-up call—It makes sense that millennials, especially the younger ones, are slightly short-sighted. Make the value of an advisor more tangible by bringing planning for major life events, such as purchasing a home, preparing for children, or planning for emergencies, to the forefront of your value proposition.
Play to the DIYers—Engage millennials early and often as they enjoy on-demand access to information. This may require more of a time commitment, like devoting a sleeve of a portfolio to a client’s discretion or allowing them to do some research and pick their own investments.
Be resourceful and accessible—In the age of the internet, millennials can learn about any topic with a few Google searches; you can increase your perceived value by ensuring you’re the one with the information that answers their questions. Consider implementing an education component to your practice.
Know their “why”—Understanding why millennials save is the first step in engaging them. Stay aware of emerging technology trends and devote resources to leveraging financial technology. Show the next generation of investors that you recognize their priorities, whatever they may be.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
