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Targeting the Elusive Millennial Client

Less than 25% of Millennials work with financial professionals. Do you know how to break through?

There are many theories seeking to explain why many millennials are not using financial planners. Economics, sociology, political theory, and philosophy all supply their own answers, some more convincing than others. Millennials themselves provide a variety of reasons for not using professionals to manage their finances. So, while generational theory may provide some insight, a warning against generalizations may also serve financial planners well, as this alone may capture the diversity of thought among millennials and encourage financial professionals to tailor their services to individual clients, not to a generation as a whole.

Millennials are a cohort of Americans born between 1981 and 1996.[1] They make up over one-fifth of the U.S. population—more than 75 million people—and over one-third of the workforce.[2] Anywhere from one-fifth to one-fourth of millennials are estimated to use professional financial services,[3] and they are statistically less likely to use a financial professional the less money they make.[4] At the same time, there are estimates that almost two-thirds of millennial investors and one-third of the overall cohort want to use a financial planner in the future.[5] With so many millennials considering professional financial services, the question then becomes how to convert the curious into the committed.

 

How are millennials investing and saving?

Many millennials, contrary to certain assumptions, are goal-oriented and have already begun planning for their futures. Multiple studies have found that they are beginning to save for retirement earlier than their baby boomer parents.[6] It is a matter of some debate whether this reflects a confidence in their ability to retire or an anxiety that they will be unable to.[7] Almost three-fourths of millennials who are offered a 401(k) retirement account participate in it. They are also investing in stocks, mutual funds, and cryptocurrency.8

Retirement is the main goal among the largest number of millennial investors, although their ideas for retirement vary. Some have traditional goals or hope to retire early.[8] Others hope to travel during retirement, with many believing home ownership is out of reach.[9] Still others are planning for “mini-retirements” during their working years. “I want to be able to take time off and live off my investments for a while,” says Natalie Camloh, a graphic designer. “I don’t think I’ll be able to hike the Appalachian Trail when I’m in my mid-sixties, so being able to take mini-retirements is a goal for me.”

Millennials are sometimes referred to as a Do-It-Yourself (DIY) generation of investors. Certainly, many are not managing their portfolios as actively as this nickname might suggest and are simply putting money away in defined contribution accounts. But the rising popularity of fintech, including stock-trading apps and robo-advisors, paints a picture of a very real DIY phenomenon. The stock-trading app Robinhood has more than 22 million accounts.[10] The robo-advisor Acorns has more than 8 million users.[11] The narrative around these apps is that their userbase is mostly millennials, and indeed the median age of app-users trends young.[12]

Millennials are clearly saving. They are clearly investing. The question remains: Why are so few using a financial planner? Explanations vary.

Reasons why millennials are not using financial planners
 

Millennials lack money and assets for investment

Millennials currently hold a tiny share of America’s wealth. In 2020, they owned just 7% of the country’s total assets, well below the 26% held by baby boomers when they were a similar age.[13] Millennials also carry a lot of debt. A consumer debt study found they owed an average of over $100,000.[14] This includes credit card debt, student loan debt, auto loan debt, and personal loan debt. This leaves them with less money to invest than previous generations. Studies into wealth divisions among millennials show a correlation between less money and a lower likelihood of using professional finance-management services, with wealthier millennials more likely to use a financial planner than their less wealthy peers.[15]

Millennials lack trust in the financial industry

There’s a widespread belief that millennials distrust the financial industry in general, and financial planners specifically. People note that millennials graduated into a difficult job market due to the Great Recession, which wiped out many of their parents’ wealth—although this theory does not account for why millennials’ parents, many of whom are baby boomers, still use financial planners. Increased wealth inequality and the decoupling of the financial markets from the economic realities of most Americans may have seeded millennial cynicism toward the financial industry. Media reports of corporate malfeasance, fraud, and lack of transparency feed into this narrative.

Millennials are also considered to be wary of financial planners as a profession. Reports abound of financial planners who have offered bad advice or defrauded clients. Some millennials may simply need assurance that their producer has their best interests in mind. “I don’t use a financial planner, but if I did, they would have to be a fiduciary,” say Jacob Lamar, a legal recruiter. “Otherwise, I couldn’t trust them. A financial professional is going to be more sophisticated than you, so you need some assurance that they won’t cheat you.”

Millennials don’t see themselves represented in the financial planning industry

A lack of diversity in the profession may also be contributing to a lack of trust. Millennials are the most diverse adult generation in American history,[16] but this is not reflected in the financial planner profession. The Center for Financial Planning (CFP) Board found that in 2019, Black and Hispanic people make up just 15% of financial professionals, despite making up 30% of the population. They also found that just 33% of financial professionals are women, despite accounting for 52% of the population.[17] The CFP Board noted in its report that a lack of diversity may be hindering customer growth in the industry, as diverse populations have trouble finding financial professionals who look like them and who they feel can understand their experiences and needs.[18]

Millennials have easy access to financial information and services

Millennials have an abundance of resources at their fingertips to learn how to manage their finances. Even if they do not know where to begin, online digests and articles exist to provide a beginner’s curriculum and outline the path to more advanced studies. “There are a lot of ways to teach yourself finance,” says Jesse Stayer, a copy editor. “There’s so much nuance to it, but there is also information available if you’re willing to find it. I use websites, books, apps. Experience is also a great way to learn—and now there are so many ways to gain firsthand investing experience. You can just start out by investing a little. I use the Fidelity App and Trader Pro. I also learn a lot from seeing other people’s mistakes.”

Information is also available on YouTube, TikTok, and through podcasts. One survey found that 71% of millennial investors use YouTube to receive financial advice.[19] Many of these information sources provide a great deal of content and cultivate an ongoing relationship with their subscribers. Popular YouTube finance channels upload new videos every few days, often with eye-catching titles about inflation, recessions, housing bubbles, and cryptocurrency that center on a creator’s persona.[20] By comparison, traditional financial planners may seem stuffy and impersonal.

Millennials are investing for themselves

Millennials may not be using financial planners in part because many are only investing for themselves instead of investing with spouses or for children. In 2019, only 44% of millennials were married, compared with 61% of baby boomers at a comparable age.[21] Millennials are also waiting longer to have children. “I didn’t work with a financial planner until after I got married,” says Daniel Brehl, an SEO analyst. “But now that I’m married—and have a kid—the financial planner serves as a sort of mediator when we don’t see eye-to-eye on how we want to invest our money.” It may be the case that many single millennials do not see a need for a financial planner if they are only person they need to consult before making a financial decision.

How to get more millennials to use financial planners

There is good news for financial planners looking to work with younger clients: A lot of millennials want to work with them, if not now then at some point in the future. Millennials do not currently control a significant share of American assets, but Bank of America Merrill Lynch predicts that, worldwide, their earning power will continue to increase over the next 10 years.[22] Inheritances are also set to increase among millennials, many of whom have baby boomer parents.[23]

As millennials get older, their finances may become more complex. They will marry and have children, acquire mortgages, inherit money, and become involved in various business ventures. They will also likely encounter unexpected expenses that younger millennials may not be factoring into their savings plans, such as healthcare costs and parent care.[24] Some experts predict that millennials may age out of apps and robo-advisors as their finances become more complex or as the initial excitement of managing their portfolio wanes.[25]

But what can be done now? Certainly, some millennials need a wakeup call. Although many of them are saving, they may not be saving enough.[26] A financial planner has an opportunity to examine DIY plans and point out their potential shortcomings. But this, of course, requires a millennial to first agree to talk with a financial planner.

There are really any number of things financial planners can do to try to bring in millennial clients, keeping in mind that millennials are a diverse group of people with diverse ideas and wants.

  • Attracting more diverse clients: Financial planning companies may be able to attract the large contingent of diverse millennials by focusing on diverse hiring practices within their companies. Companies and membership organizations such as the Association of African American Financial Advisors, Elle Investments Inc., and Raymond James are already working toward increasing diversity in the industry.
  • Attracting DIYers: Financial planners may want to offer combination portfolios, giving DIYers who enjoy the day-trading aspect of investing a sleeve of their portfolio to play with.
  • Gaining trust: Financial planners may want to increase their online presence on places like YouTube, TikTok, and within the podcasting and blogging spaces. A strong online presence can help establish expertise and counter media narratives about the untrustworthiness of the financial industry. Millennials may also be more likely to trust financial planners if they take on a fiduciary role in managing clients’ portfolios.
  • Providing clarity: Many millennials may feel overwhelmed by the wealth of financial information available, which is often contradictory or traffics in click-generating fear-mongering—YouTubers seem especially prone to this. Financial planners can present themselves as trusted experts who can cut through the noise and provide clear and practical financial education.
  • Targeting millennials with complex finances: Financial planners may want to target outreach to millennials who are likely to have the most complex finances: older millennials, married couples, homeowners, entrepreneurs—even those with debt. These millennials may be more amenable to having someone else manage their finances.

Millennials are not a dead-end prospect for financial planners. They may have some unique aspirations but, like previous generations, at the end of the day they want financial security. Financial planners are uniquely suited to help them reach their goals.

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