The Millennial generation makes up more than a quarter of the U.S. population according to the U.S. census, and they are inheriting and accumulating wealth, which makes them an ideal prospect for many financial professionals. Financial providers with a focus on Millennials need to be aware of how Millennials perceive financial professionals, so Spectrem Group recently conducted research to gain insights into how Millennials perceive financial advisors, the types of advisors they have chosen to work with, as well as why some Millennials are not currently working with an advisor.
An Independent Financial Planner is the most used type of individual Millennials use to manage their assets, with a Discount Broker being the second most popular. Millennials are also more likely than other age segments to use an Accountant or an Attorney as the individual they use to manage their assets. Millennials are less likely to be working with a Full-Service Broker than older investors. Thirty-six percent of Millennials do not use any advisors to manage their assets. Among those who are lucky enough to be working with this highly sought-after investor segment, what are some of the hurdles to gaining a Millennial as a client?
One hurdle that financial professionals will have to overcome when working with a Millennial client is the perception that the advisor is more concerned with selling product than helping their client. This sentiment is felt by 56 percent of Millennials, which is a stark difference from the 34 percent of Baby Boomers and 28 percent of WWII investors who feel similarly. Only 20 percent of Millennial investors disagree with the idea of financial advisors being more concerned with selling products than helping clients.
Another challenging in working with Millennial clients is that they are the most likely to use multiple advisors. Over a quarter of Millennials have two or more advisors, while only 12 percent of Gen X use more than one and only 15 percent of Baby Boomers use more than one advisor. In fact, 13 percent of Millennial investors use three or more financial advisors. Among those Millennials that work with more than one advisor the reason why is split between their perceived need for specialized products or services their primary advisor does not offer, and simply not wanting all of their assets with just one advisor. Twenty-three percent of Millennials that do not have the majority of their assets with their advisor have just not taken the time to consolidate their assets to one advisor, revealing an opportunity to gain share of wallet with these clients.
Among those Millennials that do not work with an advisor there are a variety of reasons why, with the most common reason 38 percent of Millennials identify is that they feel they can do a better job of investing than a professional. Twenty-two percent of Millennials who do not work with an advisor do not feel their advisor would be looking out for their best interests. Help from family and friends is a reason why 16 percent of Millennials do not use an advisor, while the expense of an advisor is identified by 13 percent of Millennials as the reason why they do not work with an advisor.
With the amount of wealth that will be moving into the hands of this generation many firms have determined that Millennials are a critical component of business development. Being aware that many Millennials are skeptical of the motivations of financial advisors, as well as the perception that their primary advisor does not provide specialized products or services they need can help firms tailor their marketing and communications to this target segment addressing these concerns.