Feel the ground trembling underfoot? It's the largest generation in American history thundering into the economy: more than 92 million millennials, now about 19 to 35 years old.
After swaying their parents' decisions for years, they'll control $11 trillion of their own by 2030, according to generational expert Cam Marston, who surveys the landscape for his firm Generational Insights. With an estimated $344 billion in inheritances landing in their laps by 2040, they're going to become the primary consumers of financial advisory and investment services. Advisors who understand this generation and what they need will be able to cultivate the loyalty of clients who will be saving, investing and planning for decades to come.
But you know that. You've already put up a website, dipped a toe in the water with LinkedIn and possibly Facebook, and begun to cultivate relationships with your clients' children. Still, millennials may seem a foreign species if you're used to clients nearer your own age.
You're not alone. "We all live in the past, some further back than others," wrote IA columnist and veteran consultant to the advisory industry Angie Herbers in a January article. "[M]ost baby boomer advisory firm owners […] still think the world largely works the way it did 20 or even 30 years ago."
While helping create client service programs for a number of advisory firms, Herbers has found that many financial professionals get it wrong when working with millennials. "They often believe an app, a website and automation is the backbone of the 'new' generation of wealth," she said. "We just have not found this to be true."
With the usual caveat about applying broad generalizations to unique individuals, here's what several industry authorities have learned about this generation and how to earn its members' respect.
Financially Confident (They Say)
As teens and young adults, millennials basked in economic growth and optimism until the Great Recession yanked the rug out from under everything. Still, many of them say they're confident about their financial well-being — more confident, in fact, than most of their elders are.
Tyler Nunnally, U.S. strategist for risk tolerance profiling firm FinaMetrica, told us that 43% of its millennial clients report "a great deal of confidence" or "complete confidence" in making good financial decisions. By contrast, only 30% of older clients feel the same degree of certainty. "Time will tell whether this represents a false sense of security," Nunnally said.
Herbers is skeptical. "I believe they are outwardly self-confident, through social media, with friends and online," she said. "But when you get them in a room without the pressure of their peers, they are often not confident about their finances. The social pressure to 'be someone' is very high among this generation."
What They Need To Hear
"One of the biggest challenges facing millennials," points out Kol Birke of Commonwealth Financial Network, "is that through advertising and social media, they see the best of what the world has to offer with the idea that it's normal to get it all, rather than the hard truth that we often need to make tough priority decisions and live without a lot of what we're led to believe will make us happy."
"Our country is woefully financially illiterate," agreed Deena Katz, co-chairman of Evensky & Katz/Foldes Financial. "It hasn't helped this generation that their parents didn't teach them much about money and often tried to hide their own financial difficulties."
Many millennials need to learn that "waiting on a windfall like a stock option event or an inheritance is not planning," Herbers said. "Financial wealth is the accumulation of years of discipline and saving."
She added, "This is a generation that has grown up with an online library — the World Wide Web — at their disposal, where they can 'self-teach' themselves anything, or so they believe. The social pressure to be DIYers is very strong among millennials. While this self-education is good in many ways, it can be bad because it makes many of them think they can be their own advisor."
Marston, too, has noticed "a wide gap between what they think they know and what they do know. Millennials have big goals but no plans. They think anything is attainable."
What they need, he said, is coaching from a "therapeutic educator" (to use Olivia's term) who can help build a bridge between their professed confidence and their level of actual knowledge. In the meantime, he advised, don't tell millennials that something can't be done. Instead, explain how it could be done and help them assess the necessary tradeoffs.
'We Are the World'
Millennials bring social consciousness to almost everything they do.
As a generation, Marston has observed, they're idealistic, environmentally aware and optimistic about the power of the government and their own activism to change things for the better. Millennials are willing to put their money where their morality is, shunning companies that seem greedy or callous and favoring those that support their values.
In a very literal way, millennials are eager to change the world. They're more likely than boomers to be concerned about both domestic and international issues, according to a 2016 donor survey for Fidelity Charitable. Some 42% also said they had tried such forms of philanthropy as buying from a company with a social mission, compared to just 14% of older Americans.
