Even in the hands of a financial professional, many wealthier millennials still don’t feel comfortable revealing their true money habits. According to Investopedia’s Affluent Millennial Investing Survey, 30% of affluent millennials report having lied to their financial advisor (FA) or a money management app about their spending or investing habits, presenting a hurdle for both human advisors and digital platforms alike.
According to the nationwide survey of 1,405 individuals, of those who did report lying, nearly half (46%) cited embarrassment over how much they spent as the reason for withholding the truth.
Affluent millennials were also significantly more likely than Gen X respondents to report lying, with only 20% of Gen X admitting to being deceitful about their spending or investing.
However, when asked about how important a list of qualities were in financial tools, products, and professionals, affluent millennials listed “honesty” at #1 (89%), with “trustworthy” and “has my best interests in mind” tied for #2 at 86%. Despite admitting to hiding the truth from their advisors or financial management platforms, wealthy millennials want to know the financial tools and experts they do turn to will be straightforward and reliable.
Being Honest Can Hurt, Especially Around Money
Why lie to the people or platforms you’ve paid to help you? According to the survey, of the millennials who admitted lying, 34% stated they were dishonest because they thought their FA would judge or shame them for the truth. This is despite the fact that affluent millennials report advisors are the most trusted source for financial advice, more than robo-advisors, books, websites or any other source of financial information.
Affluent millennials might be less than forthright even when answering a written questionnaire, suggests Doug Boneparth, President of Bone Fide Wealth, because the questions are reflective. “You take a look at yourself, and a lot of times people won’t like what they see.” Self reflection, and the accompanying guilt, may sting as much as judgement from an advisor, furthering affluent millennials’ hesitation to be honest even with themselves.
According to Boneparth, dishonesty is a sign of the stigma surrounding money conversations. “It means we have work to do as advisors, to make sure that we make a comfortable space for our clients to share the truth about their financial situation with us.”
Marguerita Cheng, Chief Executive Officer at Blue Ocean Global Wealth, is not surprised that millennials sometimes misrepresent their earnings or spending. “Technology has made things more accessible, but that doesn’t mean they feel the need to give an FA instant access to their life. You are a stranger, and you have to earn their trust.”
Still, Millennials Trust Advisors More Than Anyone Else
Despite their hesitancy to be honest, 43% of affluent millennials report having financial advisors. 65% report that FAs are very trustworthy, compared to only 58% of Gen Xers, suggesting a growing acceptance of the financial advice industry across generations. Additionally, 55% of affluent millennials report FAs are their most trusted source of financial information.
The survey also revealed that 56% of both affluent millennials and Gen Xers trust FAs over robo-advisors. Conversely, only 11% of affluent millennials and 8% of Gen X trust robo-advisors more than human advisors.
Advisors Help Address Some of the Biggest Financial Obstacles
The Affluent Millennial Investing Survey revealed that 58% of affluent millennials whose parents had an FA now have one themselves, compared to only 32% of affluent millennials whose parents did not. Those whose parents had an FA are also significantly more likely (55%) to feel confident about their finances, vs only 35% of affluent millennials whose parents didn’t have an FA. Considering the importance of financial confidence to savvy money management later in life, the findings suggest that FAs can play an important role in financial literacy throughout a client’s lifetime.
Affluent millennials who do use financial advisors also report better investment performance. When examining satisfaction with investment performance between affluent millennials with and without a financial advisor, 27% of respondents with an advisor say their investments perform very well—2X as many as those who don't have an FA.
Affluent millennials who consider themselves knowledgeable about investing are more than 2X as likely to have an FA than less knowledgeable affluent millennials. They're also 5X more likely (73% vs. 14%) to feel very confident in their ability to make their own financial decisions, associate investing with positive emotions, and are less likely to find it intimidating, risky or overwhelming.
How Advisors Can Help
As simple as it may sound, a truthful check in can trigger fears of judgement and guilt, steering some affluent millennials away from telling the truth to their advisors.
Despite this, advisors require transparency from the client, which Cheng says is much more likely when millennials work with an FA who has a collaborative and non-judgmental approach. “It’s important to understand what people value. Money is for spending: we either spend it today or save it so we can spend it on the things we enjoy in the future.”
Ultimately, much like a medical doctor, financial advisors can’t provide the best advice if they don’t have the full picture of their client’s financial health. While it’s up to clients to disclose all relevant information to their FAs, the challenge also lies with advisors to provide helpful, non-judgemental support that encourages an open and beneficial relationship between both parties.
Investopedia sought to examine what motivated investment decisions for a generation that came into adulthood during the great recession and has notoriously encountered a variety of challenging economic factors. In order to understand attitudes around investment, we studied those who should have disposable income to invest, referred to as “affluent millennials.” By examining a segment of the population that makes a greater than average yearly income for their age group, we hoped to eliminate financial hardship from the reasons they may not invest.
Working with market research firm Chirp Research in May 2019, Investopedia obtained responses from 1,405 Americans, comprised of 844 affluent millennials (ages 23-38) through an online survey and compared their actions and attitudes to 430 Gen X and 131 Gen Z respondents. Affluent younger millennials were defined as those ages 23-29 with a household income (HHI) of $50,000 or more, and older millennials as those ages 30-38 with a HHI of $100,000 or more. The survey’s median millennial income was $132,473, compared to a median millennial HHI of $69,000.
Before fielding the quantitative survey, Investopedia wanted to ensure the right kinds of questions would be asked, in language that resonated with the respondents. Investopedia worked with Chirp to conduct nine 60-minute 1-on-1 interviews with participants in Birmingham, Chicago, Dallas, and New York City. The interviews focused specifically on the language affluent millennials use to describe experiences managing their own finances, as well as their opinions, beliefs, and attitudes toward managing money and investing.