According to the most recent count, there are approximately 80 million young people in America today who were born between 1980 and 2000, making them the largest generation in American history. What’s more, over the next several decades, they are expected to inherit some $30 trillion in assets from their parents and grandparents. These facts are well known.According to the most recent count, there are approximately 80 million young people in America today who were born between 1980 and 2000, making them the largest generation in American history. What’s more, over the next several decades, they are expected to inherit some $30 trillion in assets from their parents and grandparents.
These facts are well known. But for wealth management firms that have begun to target millennials, and especially for those that haven’t, there are some additional data points that bear paying attention to:
- More than half of high net-worth millennials report that they “fear they will lose money by investing in traditional equity securities.”1 Perhaps this is because they’ve lived through both the demise of the Dot Com era and one of the most severe market downturns in recent history.
- Those millennials whose wealth has come through inheritance are twice as likely to want to invest in companies that are good corporate citizens.2
- In fact, 40% of wealthy millennials say they consider social responsibility a factor when making investment decisions.3
- This isn’t the old style of SRI, either. Instead, what a majority of millennials are interested in is sustainable or impact investing – an investment approach that seeks to generate a measurable, beneficial social or environmental impact along with financial return. A Morgan Stanley poll in late-2014 pegged the interest in sustainable investing among millennials at around 84%.4
The most well educated generation ever, they are all too aware of social and environmental challenges. Aligning their investments with their personal values isn’t a nice to have. For them, it’s a must have.
A new imperative for wealth managers
To be aware of the different mindset millennials bring to the table and to be prepared to address it – this has to be a priority for progressive wealth managers. We’d like to offer a few pointers that can help wealth managers reach out effectively to Millennials.
Focus on winning their trust
The financial crash and the market volatility that followed have created a lingering state of distrust toward financial institutions among various demographics, and this attitude is often more acute with millennials. At the same time, a Deloitte study reveals that 84% of them seek and are responsive to financial advice. So the opportunity is there provided you cultivate it properly.
Their investment knowledge is likely to be rudimentary
Even HNW millennials tend to have a low-to-medium level of financial knowledge. If you perceive that the need for deeper insight exists, make sure the language and terminology you use is clear, simple and understandable.
Don’t let their reliance on technology throw you
Yes, over 80% own smart phones, and yes, 89% check into their social networks within 15 minutes of waking up.5 And yes, a growing number of technology solutions is sprouting up to provide financial information and portfolio construction mechanisms for this population. But beneath the surface, these are people with the same objectives older generations have always had – to hold good jobs, start a business, raise a family, buy a home and so on. Focus on their goals, not their tools.
Consider lowering your minimum threshold to accommodate millennials
Fidelity conducted a study several years ago with a group of wealth managers they judged to have “a successful track record” of cultivating relationships with Gen-X and Gen-Y investors, and many of those managers said they were willing to accept as clients prospects with less than the firm’s minimum provided they demonstrated a commitment to investing. Some strategically located firms had their eyes out for young entrepreneurs who might one day experience wealth events that would increase their value quickly and exponentially.
Finally, understand what matters to them investment-wise
We at 360 have extensive experience doing marketing work for a leader in sustainable investing, Pax World. In fact, we played a role in helping to popularize the concept. We believe wealth management firms that understand the potential value of sustainable investing should make it a visible part of their brand promise. At the very least, it will strengthen your ability to appeal to the HNW millennial market. Beyond that, it will help to set your firm apart generally from less enlightened practices.
