Every generation of humanity gets identified and tied with the changes in technology and social standards which occur as that generation grows from childhood to adulthood. As generations age, they don’t necessarily follow in the footsteps of the generation that preceded them; they carry with them the precepts of their entire life and change how we perceive people from older generations.

For the purposes of studying affluent investors, there are four generations of adults in America, known subjectively as World War II, Baby Boomers, Generation X and Millennials. We are nearing the point when the next generation (Is it Generation Y or Generation Z?) will be along to create its own image.

Millennials are the youngest segment of affluent investors today, it’s important to understand and absorb how they are changing the landscape of the investor-advisor relationship.

How Millennials use or don’t use financial advisors is a key component of Spectrem’s annual study Advisor Relationships and Changing Advice Requirements. The exhaustive study of the balance between investors and financial advisors is in some ways most revealing when the investors in the study are segmented by age, with the Millennials standing out as the outliers of what might be regarded as “normal” investor behavior.

“Millennial investors are coming into real money these days, but they are perhaps forever marked by the comfortable upbringing provided them by their Baby Boomer parents,’’ Spectrem president George H. Walper Jr said. “Advisors need to know how these Millennials, who will soon replace many of the investors from the World War II era, handle their relationship with the financial experts they hire.”

Understanding that the point of view of Millennials may change over time (as do the points of view of most people as they get older), it is telling that affluent Millennials are not hiring the same types of financial advisors as older investors.

·         According to the study, 87 percent of Millionaire Millennials with a net worth between $1 million and $5 million use a financial advisor. That’s a very high percentage; the average among Millionaires is 73 percent, and among Gen X Millionaires, it is only 61 percent. Investors do tend to turn to advisor as they get older, but Millennials appear to be bucking that trend, acquiring professional assistance at their relatively early age.

·         Millionaire Millennials are coming to their advisors with a self-perceived high level of knowledge of investments. Ninety-four percent of Millionaire Millennials see themselves as either knowledgeable or very knowledgeable about financial products and investments. 

·         Advisors should note as well that these Millennials who are using professional advisors are not turning to the same types of advisors older investors use. They are also turning to their accountant or attorney, their banker, or a family office representatives much more than the older generation of investors are. As a result, they are fell less likely to be using a Full Service Broker or Independent Financial Planner than investors from the Gen X, Baby Boomer or World War II generations.

·         Millennials are twice as likely to stay with their advisor’s firm rather than move with an advisor if the financial professional takes his services elsewhere. Advisors apparently cannot evoke personal loyalty from investors if the relationship is relatively new, as most Millennial investor relationships are likely to be. 

·         Occasionally, the Spectrem research provides a detail that might provoke a laugh. Asked to identify why they chose to hire a financial advisor, 36 percent of Millionaire Millennials said “my parents suggested I get one.”

Top Takeaways for Advisors

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The Spectrem study segments investors by age, wealth, advisor-dependency and occupation. In each case, there are telling details about how investors are different based on their demographics. When a new client comes into the office, an advisor who studies the results of the Spectrem research is likely to know a great deal about the investor before the first words are uttered, based on an initial description of the investor’s background.

 

But, like any new generation, Millennials dance to the beat of a different drummer in many ways. Advisors should be prepared for a curve ball that might never come. Millennials may follow the advice from their parents and invest accordingly, but they may listen to their own inner voice and make decisions that do not correspond to decisions made by older investors. So, when dealing with Millennial investors for the first time, be a good Boy Scout and be prepared. 

 

©2017 Spectrem Group