Millennials Present Opportunity & Challenge for Advisors
January 31, 2014 by Andrew Welsch
The financial crisis has had an enormous impact on millennials’ attitudes towards investing, saving and success, presenting both opportunities and challenges for financial advisors, a new survey by UBS Investor Watch finds.
Members of this young generation are goal-oriented, frugal and likely to seek out advice before making financial decisions. But having been burned by the financial crisis, they’re also skeptical that long-term investing is their path to success. Millennial investors might just be an advisor’s best dream and worse nightmare.
“We really do think that 2008 has shaped investor behavior in ways that advisors need to understand and respect,” saysEmily Pachuta, head of investor insights at UBS Wealth Management Americas.
HARD WORK
While members of all generations surveyed valued hard work, more millennials than non-millennials see that as the chief path to achieving success, by 69% to 51%. At the same time fewer millennials than non-millennials, 28% to 52%, had the same view of long-term investing.
If given new money, 42% of millennials said they would pay off their debts whereas only 15% of non-Millennials would do so. In further sharp contrast, a third of non-millennials said that they would invest it immediately in the markets while only 12% of millennials said that they would do likewise.
“They’re quite skeptical about long-term investing. It’s going to take some education and family advice for them to trust in investing,” Pachuta says.
SEEKING ADVICE
Financial advisors may take heart, however. Survey data revealed that although most millennials do not have an advisor, they aren’t trying to plan their finances on their own. They typically seek financial advice from parents, spouses and friends before making decisions.
Pachuta says that more millennials may began seeking out financial advisors as they start having children or when their parents start suggesting that they get help with financial planning.
Also somewhat encouraging for an advisor is that most millennials said that the best advice they have received is about saving money. Other generations typically said that it was about investing.
“They’re getting it from both sides, their own experience and from their parents,” Pachuta says.
Keeping in line with their conservative investing natures, millennials said that they keep half of their assets in cash, double the rate of all other generations combined, survey data shows.
BOOMER PARENTS
And despite their youth, many millennials are also thinking long-term. About 40% of those polled said that they were highly worried about having enough money for retirement. And about a third said that they were highly worried about their parent’s financial situation as the baby boomers approach retirement.
“It’s a cycle of concern. Boomer parents are worried about their parents, and their kids are worried about them,” Pachuta says.’
She adds that this is an opportunity for advisors to help their clients and their clients’ children plan accordingly. And it’s also an opportunity to build bridges with the younger generation.
“Millennials are not as self-directed as one would think. They are looking for advice, but they go to their families first. And they’ll go with a family reference for an advisor,” Pachuta says. “What we’re telling our advisors is that millennials make excellent clients.”
The crisis has also changed this young generation’s definition of what constitutes success. Having financial freedom was important, but immaterial goals, such as having a happy family and enjoying one’s work, trumped most other financial objectives such as owning a second home or boat.
The survey included 4,165 respondents between 21 and 36 years old.
