If you're an advisor who's been putting off outreach to millennial clients, you might be missing the boat.
Millennial investors ages 27 to 42 with at least $25,000 of investable assets are starting work with a financial advisor at a much earlier age than older generations did, according to a
"Millennials' average starting age, for those who were working with [a financial advisor], was 27. For Gen X, it was definitely older than that at 36. And for Baby boomers, not until they were in their mid 40s at 45," Marcy Keckler, the senior vice president of Financial Advice Strategy and Marketing at Ameriprise Financial, said of the survey results in an interview.
In 2019,
With most of the cohort unlikely to expect pensions as Americans did in ages past, or possibly
"This is a generation that is paying attention to their personal financial situation at a younger age than earlier generations did," Keckler said. "They're just much less likely to have access to a pension."
Only 29% of millennials in the survey reported having a pension, whereas nearly half of Gen Xers, or 48%, and nearly two-thirds of boomers, or 64%, said they had one. "The retirement landscape has shifted over the decades, putting the onus on investors to save for their own retirements versus relying on funds from their employers," Ameriprise said in a press release.
Millennials' financial goals also differed from those of older investors. Some 54% of the younger cohort surveyed said growing their income was among their top three money goals, and 42% said debt repayment was a top priority. More than 8 in 10, or 81%, reported having some form of debt, and over half, 57%, said debt affected their ability to achieve financial goals. Of those with debt, 62% had credit card debt, 32% had student loans and 18% had medical debt — the last figure coming as a surprise for Keckler. Some had multiple types of debt at once, Keckler said.
By contrast, Gen Xers in the study prioritized saving for retirement, with 66% saying it was a top money goal. For boomers it was "protecting accumulated wealth," with 55% prioritizing that.
This means that advisors who work with millennials need to offer advice that's different from what their parents or grandparents might expect.
Different needs
"We asked this group in particular, where did they want advice, and they want help with investment strategies. They want help with retirement planning. They want help with taxes and estate planning," Keckler said.
She said many millennials don't understand basics of tax efficiency and how certain tax-protected retirement vehicles like a Roth individual retirement account can help them in the future, if they reach a higher income bracket for example.
"Only about 28% are thinking about tax diversification when they invest for retirement," she said, adding that advisors could step in with more advice on that.
Keckler said the millennials in the study also received more financial assistance than prior generations had, with 78% of them reporting receipt of an inheritance or help from family members on expenses such as college, or down payments on a home or car.
Some 41% of them expected to get family financial assistance in the future, compared to only 24% of Gen Xers and 5% of boomers. That could be in the form of further gifts, or inheritances.
"I really would encourage [advisors] to ensure they're not counting on it," Keckler said. "Who knows what unforeseen circumstances could evolve."
This is also where advisors can play a big role: "fostering cross-generational family money conversations," she said.
Advisors also need to understand, from a behavioral finance perspective, the emotions that millennials feel now as they face a squeeze with their money so early in their wealth building journeys.
While 60% of millennials reported spending less and 48% said they are saving more to improve their financial picture, it still wasn't enough to ward off stressful feelings about their place in a tumultuous global economy. 90% said they were very or somewhat concerned about high inflation, 84% worried about tax increases and 83% feared a recession. Some 23% said "not being able to provide for my family" was a top financial fear, 15% said it was "losing my job" and 12% said it was "not having enough money to retire."
Jason Friedman, the CEO and co-founder of AdvisorFinder, said in an interview that he had seen many millennial clients on his platform reporting a desire for more investing support now that the bull market of the past decade had disappeared.
"They're realizing now more than ever before that they need help when it comes to their investments, because they don't have as much confidence," Friedman said.
Younger millennials in their late 20s and early to mid 30s tend to have problems with basic cash flow management, Friedman said, which advisors can work on to help them pay off debt.
Older millennials in their late 30s to early 40s are likely to have families and need help setting up estate plans, as well as communicating with parents about getting included in inheritances, he said.
Friedman said he had also noticed millennials wanting help with insurance. "They want to get advice on when to have insurance, what kind of insurance to buy, how much to buy it."
Ameriprise partnered with Artemis Strategy Group on the survey, which was conducted online from January 19 to February 14. The study polled 3,518 Americans aged 27–77 who were divided into three groups: millennials, with at least $25,000 in investable assets, Generation Xers, who each had at least $100,000 and boomers, who also had at least $100,000. The survey oversampled millennials. Some 26-year-olds were included who turned 27 during the course of the study, a spokesperson for Ameriprise said in an email Tuesday.
Asked to provide a breakdown by wealth segment of the different millennials surveyed, the spokesperson declined to do so in an email, saying the data was not available to share, but confirmed that the millennials in question ranged from middle class investors to those typically considered approaching affluent (with at least $100,000 of assets), mass affluent (between $250,000 to $1 million of investable assets) and high net worth (over $1 million of assets).
