Generationally speaking, Millennials get a bad rap. They are stereotyped as lazy and unwilling to move on from childhood, with a preponderance of living at home with their parents until, well, forever.
But many Millennials have actually come into their own from a financial standpoint, and are making important life decisions about their finances. Many of those successful Millennials are using financial providers and advisors to assist them with their decisions.
However, of that subset of Millennials that use financial advisors, many of them have a tendency to switch advisors, and are far more likely to do so than investors from previous generations.
Spectrem’s new Perspective Why Investors Switch Advisors examines the relationship between investors and the financial professionals they work with and looks at the frequency clients switch advisors, as well as the reasons for which they make that move.
According to the Census Bureau, Millennials have recently surpassed Baby Boomers as the largest generation in America. Millennials are defined as those born between 1981 and 1997, so the oldest members are now in their mid-30s.
Millennials give little credit to their advisors for obtaining their wealth. Only 14 percent of Millennials with a net worth above $1 million give a nod to their advisor as a cause for their wealth level, while 25 percent of those with less than $1 million in net worth do so.
Interestingly, it is Millennials more than other generations that enjoy investing.
Millennials (investors under the age of 35) are currently in the mood to switch advisors. While only 32 percent of Millennial’s overall have switched at one time, 11 percent have switched in the last year, another 10 percent have done so within the last two years, and another 11 percent have done so in the last five years.
That makes sense, since it has probably been in the last few years, following the recession, that Millennials have been in a position to make enough money to require the assistance of a financial provider.
When it comes to the reasons they fire advisors, Millennials have a lot of things to complain about, and do so with greater frequency than investors from other generations.
For instance, 34 percent of Millennials who have switched advisors did so because their advisor was not proactive in making contact to discuss investment decisions. Only 24 percent of all investors have that complaint.
Thirty-two percent of Millennials complained their advisor did not provide them with good ideas or advice, compared to only 23 percent of all investors with that issue. Thirty-four percent of Millennials switched advisors because their portfolio was not keeping up with the stock market, compared to only 22 percent of all investors. (Interestingly, 29 percent of the World War II generation also reported that complaint).
Although the percentage differences are not huge, Millennials were more likely to complain about the timeliness of returned phone calls or emails, and advisors not fully understanding their risk tolerance.
Why are Millennials in the mood to switch? That is difficult to judge, although Millennials often work with advisors they hire without any prior knowledge of them. Only 22 percent of Millennials say they were acquainted with their advisor prior to working with them (the investor average is above one-third). Having no prior relationship probably makes switching easier to do.
When asked to describe their current relationship with new advisors, Millennials tend to be effusive in praise. Eighty-eight percent report their new advisor understand their financial goals better than the old one, and 100 percent said the new advisor offers better advice than they were receiving previously.