Millennials are being courted by almost every sort of business imaginable. As a huge demographic group that is at the point of building their careers and starting families they represent a large and growing pot of potential revenues for companies.
Like all generations, millennials have their unique qualities, quirks and preferences that differ in some ways from the generations that preceded them (as the parent of three 20-somethings, I can attest to this).
There are implications for financial advisers looking to court this group of young investors as well. Here are a few thoughts.
Big Clients of the Future
There is a projected $30 trillion transfer of wealth from the Baby Boomers to their heirs coming. A significant amount of this money will go to the current millennial generation. By courting this group and figuring out how to serve their current financial advice needs savvy financial advisers will be positioned to grow with them and likely be the ones to whom they turn should they receive an inheritance. (For related reading, see: 3 Stocks to Benefit from the Trillion-Dollar Wealth Transfer.)
Additionally, some millennials will likely become the successful executives and high-earning professionals of the future, and morph into the target high-net-worth clients of the future for financial advisers. Again, this is a good time to gain their trust and offer advice. (For related reading, see: Financial Advisors Need to Seek Out this Group NOW.)
A Bit about Millennials
Millennials live online on various social media platforms, such as Snapchat, Twitter, Instagram and more. They are used to shopping online and interacting with others there.
Like most people, millennial clients don’t want to be talked down to or treated like children. As a financial adviser, you are not their parents and they rightly expect to be treated like the adults that they are. In fact, any financial adviser who talks down to any client in my opinion deserves to lose that person as a client. (For related reading, see: Six Things Bad Financial Advisors Do.)
The growth of online financial advisers (or robo-advisors) and their popularity among younger investors is no coincidence. The convenience and 24/7 availability of these services has wide appeal. Likewise, I think the fact that they are less likely to be talked down to by an online adviser might also be perceived as a positive.
Many millennials are focused on leading healthier, simpler lifestyles, and rightly many do not trust traditional financial advisers after witnessing the trials and tribulations their parents went through during the financial crises of the last decade. (For more, see: How to Be a Top Financial Advisor.)
Millennials and Retirement
The oldest millennials began their working careers around the time of the DotCom bust, which was followed by the economic and market turmoil caused by 9/11, which in turn was followed by the financial crises of 2008-2009. They have experienced layoffs, a tough job market and other challenges at a relatively young age. Some 31% of those 18 to 34 years old live at home with their parents. This is also a generation saddled with unprecedented level of student loan debt to pay back.
All in all, this can make saving for retirement tough on millennials. While they are young and have the benefit of many years until retirement, the tough circumstances of the past few years have hindered the ability of many millennials to save for retirement and to take advantage of the their long time horizon. (For related reading, see: Retirement: Which Generations are the Best Savers?)
Additionally, a Fidelity Investments survey found that over 40% of workers in their 20s cashed out some or all of their 401(k) accounts when switching jobs. Workers in their 30s fared only slightly better.
The ability to help millennial investors get on track for retirement and offer related financial planning advice to this group is a potentially huge opportunity for financial advisers equipped to work with this generation. For firms looking to be around after their current owners and senior advisors have retired, this might be the perfect way to match junior financial advisers with this group of younger investors and hopefully have them both grow together. (For related reading, see: The Changing Wealth Demographic — And How to Leverage It.)
Some of the tools and infrastructure may be there already. Fidelity has struck deals with robo-advisor firms Betterment and Learnvest to make these services available to advisers who custody with Fidelity. This could provide a ready-made platform to deal with younger clients. Charles Schwab Corp. (SCHW) and Vanguard Group offer similar services on their platform, but these offerings seem to be more geared towards clients working with the in-house advisory services arm of these firms (as of 1Q 2015, Schwab is preparing to launch its own robo-advisor). (For more, see: How Financial Advisors Can Adjust to Robo-advisors.)
The Bottom Line
Millennials are coming of age, moving on with their careers, having families and thinking about retirement. At some 80 million strong, their sheer size makes this a group that many financial advisers and financial advisory firms will want to court as clients. Working with millennials offers both challenges and opportunities. On the one hand, millennials will be recipients of at least part of the projected $30 trillion in wealth that is projected to be transferred from Baby Boomers and older investors in the coming years. On the other hand, relatively few millennials would currently meet the minimums that many financial advisers have in place. Smart, savvy advisers will devise a strategy to serve this emerging group in a way that benefits these new clients and is profitable for the adviser. (For related reading, see: Now is the Time to Snag Gen X Clients and How to Plan for the Charitable Giving Boom.)