Risk-averse millennials relying on parents for financial support, UBS survey shows

They hold twice as much cash as boomers and only 29% are happy with their portfolios

Apr 28, 2016 @ 10:29 am

By Christine Idzelis

Seventy-four percent of affluent millennials are leaning on their parents for financial assistance, as the generation signals it's more risk-averse than baby boomers, according to a UBS Group AG survey.

Millennials hold twice as much cash on average yet don't feel safer or more content with their finances, the bank's wealth management unit for the Americas found. The firm surveyed 2,971 affluent and high-net-worth investors last month.

The generation has a tighter relationship with their parents than boomers had with their own, presenting an opportunity for financial advisers, the findings show. But to win millennials' business, the conversation needs to be reframed to address their aversion to risk, which stems from the 2008 financial crisis, according to Sameer Aurora, the head of client strategy for UBS Wealth Management Americas.

“They came into adulthood during a very uncertain economic time,” he said. “The financial crisis has cast a long shadow.”

The UBS survey included 1,131 millennials aged 21-29 who have at least $100,000 in household income or the same amount of assets to invest, as well as 30- to 36-year-olds with a least $250,000 of investible assets.

Jobs were hard to find as they were graduating from college, said Mr. Aurora, and in some cases “they saw their older siblings having to go back home.” Many also watched their parents delay their retirements because of the Great Recession or become concerned their nest eggs wouldn't last.

Beyond their financial support, a majority of millennials view their parents as peers, mentors and friends, whereas boomers saw their own parents as authority figures, according to the UBS survey.

“Boomers and millennials have together redefined the parent-child relationship,” Mr. Aurora said, noting that they're “much closer to their kids.”

Most of the financial support parents provide is for necessities. Twenty-nine percent of those surveyed receive help for health insurance, 28% for home purchases or rent, 26% for auto insurance and 23% for utilities.

The UBS survey found that boomer parents are “overwhelmingly positive” about helping their children financially, with 80% saying they feel good about it. Only 10% said they withhold support to teach their adult children financial responsibility.

Not everyone is perfectly comfortable with the situation, though. Fifty-two percent of millennials feel shame, frustration or guilt about accepting assistance from their parents.”There is that underlying duality,” Mr. Aurora said.

Millennials are putting off marriage and children longer than boomers did, opting for adventure and life experience, according to the survey.

In “charting their own financial course,” Mr. Aurora said that they aren't as inclined to embrace a traditional buy-and-hold investment strategy. “They would rather trust their gut and time the market.”

Only 29% of millennials said they were happy with their financial portfolios, compared to 78% of boomers.

They're almost twice as likely to move home after college, primarily to save money, though it's not all about finances, the survey showed. Twenty-four percent indicated they live with their parents out of preference, while 22% said their parents wanted them to stay.

Of course, advisers would do well to insert themselves in that tight-knit relationship between the two large generations, according to Mr. Aurora.

“It's very important to start building a bridge down to the clients coming up,” he said. “They're a tremendous opportunity.”

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