Practical analysis for investment professionals
28 November 2018

What Millennials Want: Not What You Think

Everyone thinks they have millennials figured out. But a new report suggests we don’t know what we think we know about this critical demographic, especially when it comes to investing.

And that’s a big deal for finance professionals. Think about it: Millennials are poised to inherit about $30 trillion in the next 30 years. If advisers plan on managing any of that wealth, they better develop an understanding of this next generation of investors.

Based on the data in Uncertain Futures: 7 Myths about Millennials and Investing, a study of US investors conducted by the FINRA Investor Education Foundation and CFA Institute, the first step to gaining that understanding is forgetting everything we’ve heard about millennials and money.

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That’s no easy task. The conventional wisdom about millennials — those born between 1981 and 1996 — fits into a nice, neat little narrative. As a group, they are fairly homogeneous, it is assumed. They are ambitious and overconfident. Since they grew up in the digital age, they are tech savvy and naturally inclined towards robo advice and cryptocurrencies, but having come of age amid the Great Recession, they carry more debt, have less income, and are naturally mistrustful of the financial industry and finance professionals.

Yet the study’s results, culled from eight focus groups and a 2018 online survey of nearly 3,000 millennials, baby boomers, and Gen Xers, unravel each of these assumptions and reveal a much more diverse and complicated cohort than the popular stereotypes imply.

When it comes to financial goals, the assumed overconfidence and ambition of millennials should translate into expectations of early retirement. But the data does not bear this out: Only 3% of millennials with taxable retirement accounts anticipate retiring before age 50, and a sizeable proportion of millennials don’t expect to retire at all. Moreover, the goals of non-investing millennials are exceptionally modest, with 40% of this group saying that their top goal is simply not living paycheck to paycheck. The goals of millennials with taxable accounts line up fairly well with those of Gen Xers and baby boomers who also have such accounts.

Other data points from the study further undermine the millennial overconfidence meme. Among all millennial segments, there is widespread acknowledgment that there is much about investing that they don’t know, that far from being overconfident, they believe they have broad gaps in their investment knowledge and skills.

Indeed, notwithstanding their presumed tech savvy, millennials are not especially well informed or curious about robo-advisors. Of those surveyed, 37% had never heard of robo-advisors, and only 16% said they were very or extremely interested in them. Moreover, when working with a financial professional, more than half of the millennials studied said they’d prefer to do so face to face. They were similarly unimpressed with cryptocurrencies.

So what about trust? Millennials have had to navigate the most difficult economic landscape of any generation since the Great Depression. The financial crisis has defined their world and shaped their expectations. Surely advisers can expect to have a more difficult time convincing them to take a chance and entrust them with their money, right? Apparently not. Contrary to popular wisdom, the difficult economic times have not made millennials overly skeptical of finance professionals or the finance industry. According to the study, 41% of millennials with retirement or taxable accounts work with an adviser and 72% of these are either very or extremely satisfied with them. Finally, only 15% of those millennials not using an investment professional said it was due to a lack of trust.

So what should finance professionals take away from all this?

It comes down to delivering to millennials what they want from the financial industry. And the data demonstrates just what that is. It isn’t robo-advice, cryptocurrencies, or the extravagant returns that the cliches suggest. Rather what millennials want are financial educators. They want advisers who will fill in their knowledge gaps, keep their interests at the forefront, and customize approaches to meet their needs.

Unhelpful stereotypes aside, what millennials want isn’t much different from what any reasonable person of any generation would want in an adviser. And it’s the finance professionals who can best deliver those desired services who will successfully navigate the massive wealth transfer that will take place over the next several decades.

The complete report, Uncertain Futures: 7 Myths about Millennials, and full survey data can be accessed on the CFA Institute website.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/memoangeles

About the Author(s)
Paul McCaffrey

Paul McCaffrey was formerly the editor of Enterprising Investor at CFA Institute. Prior to that role, he served as an editor at the H.W. Wilson Company. His writing has appeared in Financial Planning and On Wall Street, among other publications. He is a graduate of Vassar College and the Craig Newmark Graduate School of Journalism at CUNY.

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