Is the Next Generation Using their Parent’s Advisor?

12/1/2021

Children often follow their parent’s example for many different things, including for financial topics.  Financial institutions often talk about how important it is for financial advisors to develop relationships with the children of their clients. Millennial and Gen X investors are the “children” of many clients, so they have a complicated financial picture themselves, possibly with student loans, retirement plans, home ownership, or a slew of other issues. How do these investors go through the process of selecting an advisor to work with? Do they utilize the advisor that their parents used?

It is important to be focusing on these investor segments as 82 percent of Millennials, and 65 percent of Gen X investors are using a financial advisor in their financial decision-making. Millennials are most likely to identify their Banker or Accountant as their primary advisor, while Gen X investors are more likely to indicate that Independent Financial Planners, Full-Service Brokers, or Investment Managers are their primary advisor. The type of advisor that Millennials are using is not surprising given they are younger and may have only interacted with their accountant or bank.

While the type of advisor an investor uses is important, sometimes it is of greater importance to understand why they selected that advisor, or how they came to know that advisor. This is where their parent’s advisor can come into play in a significant manner. It is worth noting that nearly a quarter, 23 percent, of Millennials and 39 percent of Gen X investors indicate that their parents didn’t have an advisor, so there was not an existing relationship for these investors to connect with. What about those whose parents did have a financial advisor? How does that relationship impact Millennial and Gen X investors?

Sixteen percent of Millennial investors indicate they would not ever use the same advisor as their parents, according to recent research from Spectrem Group. Gen X investors are slightly more open to the idea, with only nine percent indicating they would never use the same financial advisor as their parents. While Millennials are more likely to feel they would never use the same advisor as their parents, they are also more likely to be using the same advisor as their parents, showing some contradiction in this generation. Thirty percent of Millennials use the same advisor as their parents, while 23 percent of Gen X investors use the same advisor as their parents. A third of Millennial and Gen X investors with a household income of $500,000 or more are using the same advisor as their parents.

Nineteen percent of Millennials feel that their parent’s advisor is simply too old for them to work with. Along with that sentiment, 14 percent of Millennials feel their parent’s advisor is old fashioned and not current with newer investments. While this is possible, it is also possible that the advisor just isn’t talking to the parents about newer investment options rather than the idea that they are too old fashioned. Gen X investors are far less likely to feel this way about their parent’s advisor, with only 10 percent indicating their parent’s advisor is too old, and 8 percent feeling that their parent’s advisor is old fashioned and not current with some of the newer investment options. Millennials and Gen X at the highest levels of income are the most likely to feel the advisor is too old to work with or that the advisor is old fashioned and not current with newer investment options.

Often the decision to work or not work with an advisor comes down to the relationship between the advisor and client. Nineteen percent of Millennials feel that the type of advisor relationship they want to have is different from that of their parents. Eleven percent of Gen X investors feel similarly. 

Whether investors choose to use their parent’s advisor or embark on a new relationship with a different advisor, there is still much that can be learned from watching their parents utilize a financial advisor. Even for those investors whose parents never worked with an advisor there are lessons to be learned from that.