Millennials' financial habits and priorities differ from Gen X, boomers

Advisers need a new agenda to attract this giant demographic as clients

Apr 19, 2017 @ 4:00 pm

By Liz Skinner

Advisers who want to serve millennial clients need to focus on helping them plan for what's most important to them and should work to resolve generational misperceptions about finances that could sink their likelihood of success.

More so than Gen X and the baby boomers, millennials prioritize issues like buying a home, purchasing cars, saving for and planning vacations and weddings and college planning, according to a Stash survey released earlier this month. Yet these are not issues that most financial advisers typically bring up with clients.

"We have a retirement, baby-boomer-centric service model that tends not to interest millennials," said Alan Moore, co-founder of the XY Planning Network, which helps advisers work with Generations X and millennials. "Advisers need to look at where younger investors are in their lives and help them with those issues, such as navigating debt."

The financial habits of millennials, a giant generation of 92 million people who are entering their prime earnings years, also are different from the previous two generations.

(More: Provide these services to attract younger clients)

Most believe this group is more conservative as investors than previous generations because of the impact that the 2008 economic recession had on them, as it hit during the early years of their career or in some cases as they were seeking to attend college and discovered their parents' economic trials limited such goals.

"They are not dramatically dissimilar to depression babies," said Bill Finnegan, chief marketing officer for AMG Funds, which recently completed a survey of 1,000 affluent investors that found differences among millennial investors.

What are you investing for?
MillennialsGen XBoomers
Retirement61.41%73.04%72.58%
Buying a home43.07%20.64%6.94%
Vacation32.98%23.19%16.19%
Buying a car20.31%9.85%6.22%
College17.23%13.53%3.52%
Weddings/engagement13.99%3.87%1.45%
Health care costs8.96%6.76%7.33%
Elder care4.16%4.66%6.51%
Source: Stash

Conversations advisers have with younger investors need to be about how they are allocating their money, their expectations on returns and their understanding of risk, he said.

The AMG survey found millennials allocate 30% on average to equities, which is a level that's nearly one-third lower than older investors. They also expect to earn an average return of 13.7%, appreciably higher than the 7.7% that baby boomers expect, according to the survey of investors who had at least $250,000 in household investable assets.

Millennials also retain a higher level of cash, 25% of their assets, as compared to 17% for boomers, the survey results, which are due out tomorrow, show.

(More: To serve millennials, advisers must adjust not only fees but their mindset)

Close to two-thirds of these young investors, who are between the ages of 17 and 36, also define "long-term" as a period of less than five years. They also put great faith in the benefits of using a robo adviser.

About 70% of millennials said they believe they would get higher returns from a robo adviser than a live adviser and 84% expect to receive more objective advice from a digital advice platform, the survey found.

"This makes sense because this group is much more distrusting of human advisers than other generations," Mr. Finnegan said.

These digital natives also are armed with information about the markets and investments, that's not what they're necessarily looking for from an adviser.

"They don't need access to information, they need access to knowledge and expertise," said Mr. Moore.

The survey by AMG Funds, the U.S. retail distribution arm of Affiliated Managers Group Inc., found millennials want regular guidance from an adviser, a "personal trainer" type of approach where the financial professional helps keep them on track with their goals.

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