Millennials Will Ruin Another Industry
Do you remember family restaurants or plastic straws? Sure, they are still around, but I can’t recall the last time I sipped through a plastic straw inside a TGIFridays. Millennials have undoubtedly had an outsized impact on the restaurant industry and similarly affect financial advice. Savings and inheritance boons for millennials will reshape the generational wealth landscape in America over the coming decade(s). And with those changes, millennials will seek financial advisors that can meet their complex needs in a socially responsible way that reflects their values.
- Millennials are slowly, but surely, increasing their wealth share
- Millennials face a different economy than their parents
- Customization is key—millenials want a financial service that matches their specific goals and needs
- By wanting to have a positive social impact, millennials are driving socially responsible investing initiatives
- Millennials are likely to transition to something other than retirement
Hey, Must Be the Money!
Experts expect millennials to (eventually) inherit a lot from their baby boomer parents. Currently, millennials hold about 7% of America’s total assets, below the 26% owned by baby boomers. About 5% of assets pass to the next generation; that pace will likely double by 2040.
The pace of wage share is also increasing for millennials. Even with some still in school, millennials now comprise more than a third of America’s workforce. As they continue to enter the workforce and gain seniority, millennials earning power will likely grow by three quarters by 2030, increasing their demand for financial services.
Millennials Have Different Wants and Needs of Financial Advice Than Their Parents
Millennials, as a whole, are doing demonstrably worse than previous generations. Quite simply, they have more student debt and fewer homes than their parents did at their age. But, despite what their parents say, it’s not their fault. The argument that millennials spend too much on lattes and avocado toast to buy a house was always bullshit. For starters, they got whacked with two major recessions. The Great Recession hit millennials entering the workforce the hardest. Yes, it was hard to get a job out of school with soaring unemployment, but more damaging was the stagnation of wages and opportunities for advancement. After a long slow decade of growth, it seemed like millennials were coming into their own, taking higher-paying jobs, but then the pandemic cut those aspirations short. The economy contracted significantly, again. Saving money on lattes and fancy toast doesn’t fix missing economic opportunities.
Millennials Don’t Want the Same Financial Advice
The established wealth management profession currently underserves millennials. These firms grew out of the old sales model but never grew up to give proper financial advice and planning. Today, the most prominent financial “advice” firms’ business models are more concerned with selling products and gathering assets under management. Even successful millennials may not meet the asset minimum as they pay off student loans, save for a house, or whatever else. Millennials desire a service that meets their needs and goals; they don’t want to “be sold” on stocks and insurance.
Millennials desire financial advice to help them plan for and reach all those non-retirement goals: house, wedding, college planning, student loan repayment, etc. Technology and financial products have become vastly cheaper for younger investors to access, implying that financial advisors will have to offer more to the client relationship than asset allocation labeled “retirement planning.” Millennials will want an advisor who understands their entire financial picture and a customized plan to help them meet their goals. They seek access to trustworthy professionals who are not trying to sell them products but genuinely understand their objectives and needs; they want to connect to their advisor. At this point in their lives, millennials care more about financial freedom than retirement. They prefer freedom and flexibility to do what they want, even if it means working later in life.
They Need More Than Meme Stocks
Sure, Gamestop was fun, but millennials need real help with investing. They know they need to be doing more when saving and investing but are overwhelmed and do not know who to trust. Millennials turn off to spam and aggressive sales tactics often associated with the financial advice industry. Additionally, they have also been through two stock market meltdowns and economic catastrophes in their early careers. It is pretty clear why they have become apprehensive to invest confidently.
Affluent millennials are less likely to hold stocks than older generations and more likely to keep extra savings in cash, which is the opposite of what they should be doing early in their careers. Millennials need trusted financial advice that will help them sort through the complexities of investing: How much should they be putting into stocks? What kind of stocks? Where should they keep extra savings? Should they invest or buy a house?
It’s Not All About the Money for Millennials
Millennials are also changing the way we think about investing. Baby boomers, the millennials’ parents, are far more likely to be emotionally detached from investments. However, millennials are far more likely to believe in social responsibility. Millennials are the primary driver behind the socially responsible investing movement. Eighty-seven percent of millennials believe that corporate success should be measured by more than just financial performance. Millennials are twice as likely as others to sell the stock of a company that is less socially or environmentally aware.
They are very interested in their investments’ social and environmental impact and want to be drivers of change. Socially responsible investing (SRI) aims to make money AND initiate social change. Investing in companies with shared values or building a portfolio reflecting millennials’ beliefs will change the way advisors engage clients. Millennials want a financial advisor to build a portfolio that reflects their beliefs and values, so financial advisors will need to offer customizable, socially conscious options to meet these needs.
Not Great Retirement Prospects, and That’s Okay
It’s no secret that the Great Recession delayed millennials’ ability to enter the workforce and accumulate wealth. Tragically, just as things started to look up for them, the pandemic forced another global recession that will leave them further behind. Millennials are lagging behind previous generations when accumulating wealth due to factors well beyond their control. As pensions have gone the way of the dinosaurs and social security looking unreliable, millennials will have to work longer, if not miss, retirement altogether.
Retirment Is Overrated Anyway
It may not be THAT bad. The world has changed drastically since the industrial revolution. No longer do workers retire because they cannot physically work anymore, but society tells them to. Many studies suggest that retirement, full stop, may not be a good thing. When workers retire to do nothing, their minds, bodies, and relationships tend to degrade quickly.
The concept of retirement is changing from “stopping work” to retiring TO something. Studies show that workers leaving the full-time workforce are happier and healthier when they transition to another type of work. Millennials will most likely look for a part-time job as an avocado toast maker in a coffee shop after leaving the “office” job behind. Millennials will need an advisor that helps them transition to and through this complex stage of life that is very different from the societal norms of retirement.
The Financial Advice That Millennials Want
The best financial advisor for millennials will find customized solutions to their complex needs and values that traditional advisors cannot serve under their model. The “new” model will focus on answering the worries plaguing millennials:
- Student loan debt
- Weak retirement prospects
- Starting a family
- Buying a home
- Saving for college
- Social and sustainable responsibility
- All the avocado toast
- Getting a golden retriever
With millennials’ wealth rapidly increasing over the next decades through earnings and inheritances, financial advisors and investment firms will need to change their way of doing business. Millennials want professionals that have a deeper understanding of their goals and values. As a result, financial advisors will have to go further than gathering assets and selling products. Offering services for millennials’ goals and milestones will be central to any financial advisor who wishes to serve this growing economic segment. Financial advisors that fail to do so will go the way of the dinosaurs, plastic straws, and Red Lobster.
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