What's My Age Got To Do With It?


It is easy to say affluent Millennial investors have less investing experience than their older counterparts. Does that lack of experience affect the types of advisors they use?

Our recent report Profiles of Investors Based on Their Preferred Advisor Types shows that Bankers and Private Bankers have the highest percentage of Millennial clients, although that percentage is much lower than the percentage of clients from other age groups.

It is possible Millennials merely have not had contact or involvement with other types of advisors. They perhaps invest with the banks they started their financial lives with and have not yet ventured far afield.

Obviously, Millennials are the youngest generation currently involved in investments and financial products. Advisors who understand the appeal of Bankers to Millennials can offer to provide the same traditional banking services – checking, savings, debit cards - while suggesting ways Millennials can grow into other forms of advisor relationships.    

What is less obvious is that Millennials and the Gen X generation include many wealthy individuals who have funds to invest. Among Ultra High Net Worth investors with a net worth between $5 million and $25 million, the average net worth of Millennials is more than $10 million. Among Millennials who have a net worth between $1 million and $5 million, the average net worth is approximately $2.4 million, and there are almost 200,000 of them in America.

Millennial investors make up 6 percent of the client base for Bankers and Private Bankers. Only Registered Investment Advisors and Mutual Fund Company Representatives come close, with 4 percent of their client numbers in the Millennial age group.

There is strong evidence that the relationship between a Banker and the investor is based on the reputation of the firm rather than an individual advisor. Exactly two-thirds of clients of Bankers or Private Bankers would stay with the firm if their personal advisor left the bank, one of the highest rates among advisor types.

Also, users of Bankers or Private Bankers have a high rate of social media usage, another indication that the client base might be younger. Of particular use among Banker customers is LinkedIn and Twitter, which both provide connections and articles on a platform young investors would use.

However, Bankers and Private Bankers do not have the retention rate of other types of advisors, again perhaps because young investors move on as their investment requirements become more complicated. Only 27 percent of Banker or Private Banker clients have been with the same advisor for more than 10 years, while Full Service Brokers (for example) have had 52 percent of their client base for at least 10 years.

The client base of Mutual Fund Company Representatives skew younger as well, with 4 percent of Millennials and 15 percent of Gen Xers, the highest combined percentage of all seven advisor types. The youthfulness of that client base is evidenced by the outlook of Mutual Fund Company Representative customers, who have the highest degree of optimism about the future (57 percent believe their financial picture will improve in the next year) and the highest degree of perception of the previous year’s events (54 percent said their finances improved over the last year).

One area in which investors using Mutual Fund representatives differ greatly from the customer bases of other advisors is in investment knowledge. A whopping 76 percent of Mutual Fund Company clients believe they are fairly knowledgeable about investment products and services, and another 16 percent claim to be very knowledgeable.

Interestingly, the type of advisor with the smallest percentage of Millennial and Generation X clients is the Discount Broker or Online Broker. Their client base has only 10 percent of Gen Xers and no Millennials.  

The differences that exist between advisor types based on the services they can and will provide should be addressed when discussing investments with newer members of the investor population.   

When considering the preferences Millennials and Gen X investors have regarding their advisor, remember:

·         Their dependence on Bankers might be because they grew accustomed to the traditional banking services they offer, such as checking, savings and debit cards. Financial providers and advisors must make sure young investors know that is part of the service most firms provide.

·         Millennials and the Gen X generation include many wealthy individuals who have funds to invest, and can be valuable clients. Advisors can attract them with services beyond what they might be receiving from their Bankers.

·         Millennials report a growing interest in receiving information on financial products and services via social media. Bankers have a built-in platform for social media use due to all the advertising they do to attract new clients, and other types of advisors need to advertise their own social media usage to compete with Bankers.