Millennial Millionaires Make Their Mark
Spectrem’s recent Market Insights report stated there are 10.8 million millionaires in America in 2017, an increase of 400,000 Millionaires since the 2016 report.
It figures that a good percentage of those new Millionaires are young Millionaires.
The frequently criticized Millennial generation has its fair share of Millionaires today, and they are as important as investors as those who are from the Gen X, Baby Boomer or World War II generations. Although they are less likely than older investors to use advisors, those who do hire professional help present unique personas to their advisors.
Spectrem’s new quarterly wealth segmentation series study, Financial Behaviors and the Investor’s Mindset, compares and contrasts young Millionaires (with a net worth between $1 million and $5 million) from older investors with a similar net worth and finds that Millennials have an entirely different set of concerns than those older Americans.
“There is a generational shift happening, and advisors are finding new younger clients every day, taking place of the less active older investors from the Baby Boomer generation,’’ said Spectrem president George H. Walper Jr. “It would be counterproductive for advisors to assume that younger people with sizable net worth are going to act and invest the same way older investors are.”
The most striking difference between Millennial Millionaires and older investors from the same wealth segment is that younger investors do not look to the standard explanations for obtaining great wealth. Most investors credit hard work, education and smart investing as key ingredients to their wealth creation. Not so for Millennials; they are far less likely to credit hard work (68 percent to 95 percent overall), and frugality (61 percent to 81 percent).
Instead, they are much more likely to credit inheritance (43 percent to 30 percent overall), and family connections (39 percent to 9 percent overall). While that does not define all Millennial Millionaires, it sounds like their Baby Boomer parents were kind enough to set them up with family money after the Boomer passed, and also helped them get their first job or a more lucrative one down the line that helped them achieve their wealth.
(Millionaire Millennials did not, however, lead the league in crediting luck for their wealth. Only 29 percent of Millennials credited luck, while 40 percent of World War II investors gave credence to good fortunes).
Millennials are also not as convinced as others in their wealth segment that they are set for life. Given the opportunity to answer the simple question “Are you wealthy” and place their response not as a “yes” or “no” but on a 0-to-100 scale, Millennials placed their confidence about being wealthy at 61.25, well below the average of 65.95. What’s odd about that research point is that Millennials gave greater credence than others to their parents and in-laws as being wealthy than did other older investors.
What does this mean for advisors? It may mean Millennial Millionaires have a different attitude toward their personal wealth than do other investors, and as a result, may have a different point of view about how to invest funds from that wealth. For instance, the Spectrem study shows that Millennials are much more likely to be aggressive in investing. They are not sitting on their nest eggs yet; they are building their wealth and looking to move into the next wealth segment perhaps.
There are other factors unique to Millennials that advisors must be aware of. Millennials are much more concerned about the social responsibility of their investments; more than half of Millennials want to consider social ramifications in their investments compared to just 31 percent overall.
Millennials are also not yet old enough to be considered about their personal health or the health of their spouses. They are not as concerned about national issues related to inflation, government performance or taxes.
Finally, the Spectrem research shows that Millennials are young enough that they are still influenced by all of the people in their lives, including parents, siblings, spouses, friends, co-workers and others. Millennials are hearing many voices in investment matters and advisors may need to speak up to be heard.
Top Takeaways for Advisors
Millennial investors are set to become a major player in the financial markets. Advisors working with young investors need to know who they are working with, and the motivating forces that determine their investment habits. Likewise, knowing where the Millennial got his money could play a large role in how that investor plans to invest the funds going forward.
And advisors must also prepare themselves for the generation after Millennials, which some are calling Generation Z. People born at the turn of the century are already 17 years old. It’s going to become a brave new world in investing in a very short period of time.
©2017 Spectrem Group