How to attract millennial customers as they get rich quick

They’re not just spending their dollars on avocado toast. Millennial Americans, once stereotyped as nearsighted and careless with money, are rapidly becoming wealthier and increasingly eager for financial advice, research shows. This could mean a source of new clients, if advisors know how to reach them.

“Millennials represent this huge, growing, untapped market,” said John McKenna, a research analyst at the Boston-based research group Cerulli Associates. “Your lives are getting more complicated. You’re going to need to talk to that person across the table.”

In a new study, Cerulli found that millennial Americans, roughly defined as those born between 1980 and 1994, are growing their net worth faster than any other generation today. In 2021, the average millennial had a net worth of $278,093. That’s a 182% jump from 2016, or an average annual increase of 23.1%. None of the other generations discussed in the study — the largest generation, the baby boomers and Generation X — came close to that pace.

Much of the increase reflects the new phase of life millennials have entered. Many of the older 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 add up, having that person on the other side becomes that much more important,” McKenna said.

A unique set of challenges
It is important to keep this growth in context. Millennials are still much poorer than their predecessors, even when compared to the wealth that previous generations had in their youth. According to the National Bureau of Economic Research, the median net worth (adjusted for inflation) of people ages 35 to 44 in 2019 was 19% lower compared to the same age group in 1989.

Many millennials entered the job market during the Great Recession and have since dealt with the brief (but severe) pandemic downturn, inflation, and the recent bear market. To top it off, many have gone through it all while paying off exorbitant student loans. Of the entire balance of student debt in the country, 49% corresponds to people between 35 and 44 years old, according to the Education Data Initiative.

As a result, millennials have unusually low confidence in their finances. According to a recent survey by insurance company Prudential Financial, 62% of millennials say they worry about money on a daily basis, more than any other age group, including younger Gen Z. able to reach their financial goals, such as owning a home or retiring early. Nearly half, 49%, doubted they would ever retire.

So for advisors, millennials present a unique challenge: a client base with historically low wealth and self-confidence, but also huge and growing potential.

“Younger generations need more personalized advice that meets them where they are and takes into account their unique financial goals and challenges to help them create more secure financial futures,” Prudential said in its report.

ready for help
Despite these obstacles, millennials are now getting richer fast. Furthermore, research shows, they are eager for financial advice and willing to pay for it.

According to the Cerulli study, 59% of millennials, more than any other generation surveyed, described themselves as “advice seekers,” meaning they are willing to hire a financial advisor. Only 6%, the lowest of any age group, said they were “self-directed.”

However, only 10% of millennials said they “relied on advisors,” meaning there’s still a big gap between how many want advice and how many currently receive it. That could be an opportunity for advisers.

“Could you try to take off [clients] who are older, or you could opt for a market that increasingly demands advice, wants it, is willing to pay for it and has the potential to get rich in the future,” McKenna said.

What advisors can do
The question is how to attract and cultivate customers from this generation. To answer this, Cerulli asked millennials what criteria they consider “extremely important” when choosing an advisor. Forty-eight percent, the highest response, chose “transparency in interactions.” They also value personalized advice: 45% said it was crucial that an advisor “take the time to understand their needs, goals and risk tolerance.”

The age group also values ​​one factor more than other generations: technology. One in three millennials said they want a consultant who “incorporates cutting-edge technology into their practice,” far more than the 21% of all respondents who said that.

“Make sure your technology offerings are strong,” McKenna said. “It should be easy to see your financial picture from the comfort of your home or on a tablet.”

The study also found other patterns. Millennials prefer to get all their financial services from a single “one-stop-shop” company, the research showed, and favor a flexible payment plan.

“Their financial assets may still appear 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 this knowledge to work, they must first engage millennials. To do this, McKenna suggested reaching out to older customers.

“Say, ‘We’d like to have a family reunion,'” he said. “Involve the kids in the process. Let them see what’s going on. And if you do that, and they have that face-to-face time, maybe they’ll be more likely to stay with you.”

Many millennials do not yet have significant assets. 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 road for these advisers,” he said. .

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