Despite a tough employment market, millennials are still finding jobs in the workforce. Some are even well on their way to rich careers. While they may not be at the top of the earnings ladder just yet, they do need financial advice in terms of saving for retirement, paying off debt and more. Financial advisors, however, are still not catering to this class of investors. (For more, see: Money Habits Of The Millennials.)
According to a study from investment management and retirement plan provider Principal Financial Group Inc. (PFG), just 18% of financial advisors are targeting Generation Y clients. The study, entitled The Principal Financial Well-Being Index: Advisors, also found that a majority of those surveyed — some 64% — said they were targeting baby boomers instead. About 62% were focused on business owners and 46% on affluent or high-net-worth clients. Those groups offer a far more immediate payout than low-earning (for now) millennials, after all. The study, which took place in the second quarter of 2014, surveyed financial advisors nationwide, including independent broker/dealers, wirehouses and regional brokerage firms, insurance agencies, independent wealth management firms, banks and independent asset management firms.
Leaving Opportunity on the Table
Over half of the 614 financial advisors who answered the survey said they were targeting new clients with assets of more than $250,000. That means that there is a untapped opportunity for up-and-coming advisors to start building relationships with these overlooked millennials.
The survey was part of a series of quarterly studies commissioned by The Principal Knowledge Center. It also examined the financial well-being of American workers and business owners and asked advisors for their opinions on the topic and on practice management.
DIY Retirement Planning
The survey asked why so few millennials and other younger workers are stepping forward and seeking the help of a financial advisor. According to the study, 29% of advisors said that they believe that their fees and the costs of working with an advisor are the biggest barrier to entry. Some 16% said fear about investing is what is preventing millennials from taking the step to talk to an advisor. And 10% believe that millennials, as well as many other workers, think that they can invest on their own just as successfully. (For more, see: The Generation Y Investment Portfolio.)
Savings Rates A Big Hurdle
Additionally, many financial advisors reported in the survey that a fair amount their clients — about 22% — tend to live beyond their means, 15% don't save enough money and 11% don't start to save early enough in their careers. More than half of the advisors, about 52% answered that no more than one in four of their clients started saving early enough in their career to reach the recommended level of retirement savings when the time comes. (For more, see: What Young People Are Spending Their Money On.)
Most advisors do try to help those clients who didn't start saving for retirement early enough in their careers to catch up. As financial professionals, they are more easily able to demonstrate to clients the power of starting to save early and the positive impact it has on their retirement nest egg.
Millennial workers are a potential windfall for financial advisors but much needs to be done to cater to their unique needs and retirement expectations, including education and encouraging them to save more. (For more, see: 5 Retirement Warning Signs For Millennials.)