Millennials are on the verge of becoming big players in the investment field.
Baby boomers, according to Forbes, are about to pass an estimated $30 trillion in assets down to millennials within the next few years. This generational transfer of wealth gives millennials many options on investing — starting with the investment firms they choose.
Understanding millennials’ mindset on investing and, just as importantly, learning their personality traits, preferences and dislikes, are crucial to any investment firm seeking to help them allocate their assets. For starters, millennials’ approach to investing is distinct to previous generations, and they handle money and choose the people who they entrust with that money very differently, too.
Those factors will have several ramifications for how assets are allocated in the next three, five, 10, 20, and 30 years. That’s why discovering how to connect with millennials so that they feel confident enough to trust you with their funds is critical.
How do millennials differ from previous generations, including their investment approach? Here are some revealing distinctions:
They’re more entrepreneurial. Whereas their parents, baby boomers, valued job stability and scaling the corporate ladder, millennials are more inclined to build their own businesses and take greater financial risks. They’re confident that even if they lose some money, they can earn it back — facts firms should consider as they approach this generation and brainstorm investment solutions.
They’re wary of Wall Street. After the Great Recession, many millennials were forced to take on student loans because their parents couldn’t afford college tuitions. So if they’re not entirely warm to the idea of Wall Street, what do millennials trust? Where do they see themselves putting the $30 trillion they’ll one day inherit? This group of investors favors commodities and options and they’re also more likely to put money in exchange-traded funds than their baby boomer parents.
They’re impassioned about helping the world. Millennials want to serve a greater purpose to humanity. This common trait has given rise to the concept of “impact investing” — intentionally putting money in companies or organizations that offer a financial return but also contribute funds toward creating a positive social or environmental impact.
They often don’t trust advisors. According to a study, 57 percent of millennials don’t trust advisors, believing they’re in it more for self-serving purposes than for their clients’ best interests. What they want is someone who wants to build a relationship with them and works toward gaining their trust.
So knowing how millennials and their investment thoughts are unique, how should investment firms navigate this young crowd of investors and best position themselves to reap the business of this generation, both today and in the coming years?
Create trust and be transparent. Investment firms can build a foundation to better serve the millennial generation by fostering relationships, customizing your advice, and being clear about fees. For example, millennials, unlike baby boomers, prefer flat fees over commission-based pay models; that’s what they’re most familiar with through the advents of Uber and Netflix.
Explore technology. Millennials like technology but they also like simplicity and convenience. Look for ways to leverage technology to make experiences simpler, more self-serving, and more convenient for millennial users. Robo-advisors and digital investment content platforms and tools are just the start of the options available to explore. If they find it inconvenient or complicated to do business with you, they’ll do it with someone else.
Be a great communicator. While technology and self-service drive them, millennials also appreciate a human touch in the investment space, meaning a hybrid of tech and human would be the ideal mix for them. Find out how your millennial client likes to communicate — by text, email, messaging via a digital investment content platform, or on the phone. And when you are communicating, remember to be an advisor, not a dictator. Millennials appreciate insight, but they still like to be the one controlling decisions that impact them.
Use data to customize recommendations. Track clients’ online activity to gather data about them and use this in conjunction with their personal preferences to send them customized investment ideas, alerts, and recommended products.
It comes down to this: Millennials and baby boomers are as different as rotary phones and text messages, and newspapers and podcasts. And they’re just as varied in their viewpoints of success and allocation of material wealth.
Therefore, if advisors truly want to stay relevant in the investment game, they’ll have to work hard to build rapport with this generation and show good will to retain them as clients both currently and into the future.
By Gui Costin
Gui Costin (www.guicostin.com), author of the No. 1 Bestseller Millennials Are Not Aliens, is an entrepreneur, and founder of Dakota, a company that sells and markets institutional investment strategies. Dakota is also the creator of two software products: Draft, a database that contains a highly curated group of qualified institutional investors; and Stage, a content platform built for institutional due diligence analysts where they can learn an in-depth amount about a variety of investment strategies without having to initially talk to someone. Dakota’s mission is to level the playing field for boutique investment managers so they can compete with bigger, more well-resourced investment firms.
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