Millennials' financial habits and priorities differ from Gen X, boomers

Advisers need a new agenda to attract this giant demographic as clients

Apr 19, 2017 @ 4:00 pm

By Liz Skinner

Advisers who want to serve millennial clients need to focus on helping them plan for what's most important to them and should work to resolve generational misperceptions about finances that could sink their likelihood of success.

More so than Gen X and the baby boomers, millennials prioritize issues like buying a home, purchasing cars, saving for and planning vacations and weddings and college planning, according to a Stash survey released earlier this month. Yet these are not issues that most financial advisers typically bring up with clients.

"We have a retirement, baby-boomer-centric service model that tends not to interest millennials," said Alan Moore, co-founder of the XY Planning Network, which helps advisers work with Generations X and millennials. "Advisers need to look at where younger investors are in their lives and help them with those issues, such as navigating debt."

The financial habits of millennials, a giant generation of 92 million people who are entering their prime earnings years, also are different from the previous two generations.

(More: Provide these services to attract younger clients)

Most believe this group is more conservative as investors than previous generations because of the impact that the 2008 economic recession had on them, as it hit during the early years of their career or in some cases as they were seeking to attend college and discovered their parents' economic trials limited such goals.

"They are not dramatically dissimilar to depression babies," said Bill Finnegan, chief marketing officer for AMG Funds, which recently completed a survey of 1,000 affluent investors that found differences among millennial investors.

What are you investing for?
MillennialsGen XBoomers
Retirement61.41%73.04%72.58%
Buying a home43.07%20.64%6.94%
Vacation32.98%23.19%16.19%
Buying a car20.31%9.85%6.22%
College17.23%13.53%3.52%
Weddings/engagement13.99%3.87%1.45%
Health care costs8.96%6.76%7.33%
Elder care4.16%4.66%6.51%
Source: Stash

Conversations advisers have with younger investors need to be about how they are allocating their money, their expectations on returns and their understanding of risk, he said.

The AMG survey found millennials allocate 30% on average to equities, which is a level that's nearly one-third lower than older investors. They also expect to earn an average return of 13.7%, appreciably higher than the 7.7% that baby boomers expect, according to the survey of investors who had at least $250,000 in household investable assets.

Millennials also retain a higher level of cash, 25% of their assets, as compared to 17% for boomers, the survey results, which are due out tomorrow, show.

(More: To serve millennials, advisers must adjust not only fees but their mindset)

Close to two-thirds of these young investors, who are between the ages of 17 and 36, also define "long-term" as a period of less than five years. They also put great faith in the benefits of using a robo adviser.

About 70% of millennials said they believe they would get higher returns from a robo adviser than a live adviser and 84% expect to receive more objective advice from a digital advice platform, the survey found.

"This makes sense because this group is much more distrusting of human advisers than other generations," Mr. Finnegan said.

These digital natives also are armed with information about the markets and investments, that's not what they're necessarily looking for from an adviser.

"They don't need access to information, they need access to knowledge and expertise," said Mr. Moore.

The survey by AMG Funds, the U.S. retail distribution arm of Affiliated Managers Group Inc., found millennials want regular guidance from an adviser, a "personal trainer" type of approach where the financial professional helps keep them on track with their goals.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

May 02

Conference

Women Adviser Summit

The arjuna-design Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss the reasons for the marked shift of advisers between channels, including technology, the DOL fiduciary rule and the broker protocol.

Recommended Video

Channels

Latest news & opinion

Independent broker-dealers are stepping up their game on recruiting from the wirehouses

Independent broker-dealers have narrowed the gap between themselves and the wirehouses and are able to attract more quality brokers from the Big Four.

Capital Group, sponsor of American Funds, wins 401(k) lawsuit

Decision comes as financial services companies, especially those focused on active management, have been sued for self-dealing.

SEC considers barring aggrieved investors from suing companies

Swept up by pro-business zeitgeist, regulator seeks to reverse two-decade slump in U.S. stock listings.

Wells Fargo, Morgan Stanley use contrary tactics to keep advisers

Wells is helping brokers transition to independence within the firm, while Morgan is taking them to court.

Fidelity pushes Vanguard to compete on brand in 401(k) plans

With Fidelity imposing an additional fee, Vanguard likely will look less attractive compared with comparably priced index-fund providers, advisers said.

X

Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Last News

precious metal mutual funds american funds virginia 529 1099 issued in error taxability of social security disability benefits t rowe price capital appreciation portfolio td ameritrade 529 surrendering life insurance policy hood river capital management personality testing for hiring matthews asia dividend fund td bank and td ameritrade aetna 401k plan what is the medicare part b deductible lump sum versus pension calculator pimco total return fund class a how do i enroll in medicare part b templeton global total return fund morningstar fixed indexed annuities pros and cons pay tax on life insurance payout permanent life insurance vs whole life insurance t rowe price customer service number what is a good expense ratio for 401k t rowe price health science fund morningstar how much is a 1943 steel penny worth how much does a morgan stanley financial advisor make how much does it cost to use turbotax online american funds us government securities fund ken fisher portfolio strategy virginia college america 529 fidelity spartan small cap index fund top fidelity 401k funds fidelity asset manager funds review usaa precious metals and minerals fund wells fargo store manager salary t rowe spectrum growth age limits for ira contributions how much is 1900 penny worth cashing in life insurance policies which is better taxact or turbotax