They're not just spending their dollars on avocado toast. Millennial Americans, once stereotyped as shortsighted and careless with money, are rapidly becoming wealthier and increasingly eager to receive financial advice, research shows. This could mean a wellspring of new clients — if advisors know how to reach them.
"Millennials represent this huge, growing, untapped market," said John McKenna, a research analyst at Boston-based research group
In a
Much of the rise reflects the new phase of life millennials have entered. Many of the oldest members of the generation, now in their 40s, have started families, bought homes or risen to leadership positions at work. All of this means more complicated finances and a greater need for financial advice.
"When you have a house to deal with, a marriage to deal with, when you have to think about beneficiaries — when those things start to pile up, having that person on the other side becomes that much more important," McKenna said.
A unique set of challenges
It's important to keep this growth in context. Millennials are still far poorer than their predecessors, even when measured against the wealth those older generations had in their youth. According to the
Many millennials entered the labor market during the Great Recession, and since then have grappled with the short-lived (but severe) pandemic recession, inflation and the recent bear market. To top it off, many have gone through it all while paying off exorbitant student loans. Of the country's entire student debt balance, 49% is owed by 35-to-44-year-olds, according to the
As a result, millennials have unusually low confidence in their finances. According to a recent survey by the insurance company
So for advisors, millennials present a unique challenge: a client base with historically low wealth and self-confidence, but also enormous and growing potential.
"Younger generations need more tailored advice that meets them where they are, and takes into account their unique financial challenges and goals to help them create more secure financial futures," Prudential said in its report.
Ready for help
In spite of these obstacles, millennials are now quickly becoming more affluent. In addition, research shows, they're eager to get financial advice — and are willing to pay for it.
According to Cerulli's study, 59% of millennials — more than any other generation surveyed — described themselves as "advice seekers," meaning they're open to hiring a financial advisor. Just 6% — the lowest of any age group — said they were "self-directed."
However, only 10% of millennials said they were "advisor-reliant," meaning there's still a wide gap between how many want advice and how many are currently getting it. That could be an opportunity for advisors.
"You could try to pick off [clients] who are older, or you could go for a market that is increasingly demanding of advice, wants it, is willing to pay for it and has the potential to be wealthy down the line," McKenna said.
What advisors can do
The question is how to attract and cultivate clients of this generation. To answer this, Cerulli asked millennials what criteria they consider "extremely important" when choosing an advisor. Forty-eight percent — the highest of any answer — chose "transparency in interactions." They also value personalized advice — 45% said it was crucial that an advisor "takes the time to understand your needs, goals, and risk tolerance."
The age group also values one factor more than other generations: technology. One in three millennials said they want an advisor who "incorporates cutting-edge technology into their practice" — much higher than the 21% of all respondents who said so.
"Make sure your tech offerings are solid," McKenna said. "It should be easy to see your financial picture from the comfort of your own home, or from a tablet."
The study found other patterns as well. Millennials prefer to receive all their financial services at a single "one-stop shop" firm, the research showed, and favor a flexible payment plan.
"Their financial assets still may seem low compared to their parents', so having a flexible fee schedule that includes commissions or hourly rates could be attractive to this cohort," the study said.
But before advisors can put any of these insights into practice, they first need to get millennials in the door. To do this, McKenna suggested reaching out to older clients.
"Say, 'We'd like to have a family meeting,'" he said. "Get the kids involved in the process. Let them see what's going on. And if you do that, and they get that face time, maybe they're more likely to stick with you."
Many millennials don't have significant assets just yet. But in the long run, McKenna said, bringing them into the fold will be worth the effort.
"Since this is a fast-growing wealth market … that could be loyal to you for the next 30, sometimes even 40 years, making that investment now can really pay off down the line for these advisors," he said.
