How to Attract, Retain and Satisfy Millennial and Gen X Clients

Gen X and millennial investors are different from one another and different from their older counterparts, according to a special report from Nationwide Advisory Solutions' annual Advisor Authority study published this week.

RIAs and fee-based advisors who understand their unique characteristics can compete more effectively for their business.

"The opportunity is huge," Craig Hawley, Nationwide's head of annuity distribution, said in a statement.

"As boomers shift into retirement at a rate of 10,000 per day, both millennials and Gen Xers are poised to grow more wealth and ultimately inherit their share of the $30 trillion great wealth transfer," Hawley said.

The opportunity: 52% of Gen Xers and 39% of millennials still do not have an advisor, and could benefit from long-term holistic planning, according to the report.

The Harris Poll conducted the fifth annual Advisor Authority survey online within the U.S. from Feb. 15 to March 4 among 1,021 financial advisors and 824 investors: 165 millennials, 213 Gen Xers, 379 baby boomers and 67 matures.

Differentiating Factors

Gen Xers and millennials often approach decision making differently, from choosing an advisor to making life choices, and often have different points of view.

Eighty-five percent of millennials in the survey said they were the primary decision maker in their household for long-term financial planning, compared with just 55% of Gen Xers. Likewise, 45% of millennial investors had never married, compared with 17% of Gen X investors.

Nationwide said research showed that many millennials were delaying major decisions in large part because of their overwhelming student loan debt.

When choosing an advisor, both Gen X and millennial respondents maintained that experience matters most, and both groups included personalized advice for a holistic financial picture among their top three considerations.

However, the factors that influence their decision to work with a financial advisor also reflect strong differences in values and priorities.

Whereas more millennials than Gen Xers in the survey cited socially responsible investing and increased use of mobile technology, fewer millennials cited a fee-based fiduciary standard among the top three factors that influence their decision to work with an advisor.

Nationwide said this latter finding may reflect an important knowledge gap, presenting advisors who are targeting millennial investors an important opportunity to educate them on the benefits of working with a professional who puts the client's best interest first.

Optimism Belies Concerns

The survey found that 64% of millennials had an optimistic financial outlook for 2019 overall despite their outsize debt and other financial challenges, compared with 49% of Gen Xers.

The fifth annual study also showed that 47% of millennials had an optimistic outlook on the U.S. economy for the next 12 months, versus 31% of Gen Xers.

Yet, 61% of both generations expressed concern about a U.S. economic recession over the next 12 months.

Likewise, 53% of millennials but only 36% of Gen Xers had an optimistic outlook on the U.S. stock market for the next 12 months. Yet millennials were more concerned than Gen Xers about a bear market in the next 12 months.

Roughly two-thirds of both groups agreed that market volatility would increase over the next 12 months.

Nationwide noted that worries about a declining economy, falling markets and market volatility can raise concerns about protecting assets and increase the need for guided advice.

Asked what was the chief benefit of working with an advisor when markets are volatile, millennials and Gen Xers who said they worked with a financial advisor reported different views.

Among those with a financial advisor, more millennials than Gen Xers said the most important benefit was protecting their assets against market risk, which was tied with helping them stay focused on long-term goals.

Meanwhile, 32% of Gen Xers said the most important benefit of working with an advisor during periods of market volatility was to help them make more informed decisions, compared with of 15% of millennials who said this.

How to Drive Client Satisfaction

Advisors who want to retain their younger clients would do well to help them protect against their top concerns, Nationwide said.

Although both millennials and Gen Xers in the survey shared similarities in their top financial concerns for the next 12 months, the younger respondents identified a wider range of issues among their top three.

Thirty-one percent of millennials said taxes were their No. 1 financial concern, while 25% each cited saving enough for retirement and cost of health care as their second biggest concern.

Protecting assets was millennials' No. 3 concern, cited by 19%, up from No. 7 in the previous year's survey — perhaps because of their growing concerns about rising volatility and a looming bear market, Nationwide said.

Both financing a home and financing another big expense were also among millennials' top three concerns, mentioned by 19% each — not surprising given their outsize debt.

Thirty-six percent of Gen Xers said they were most concerned about saving enough for retirement, followed by 32% who named taxes and 30% who cited the cost of health care.

Addressing the Generation Gap

Millennials are already thinking about retirement, perhaps more than some Gen Xers. Nationwide noted that many millennials came of age, graduated college and struggled to enter the workforce during the 2008 market crash and ensuing recession, and watched their parents' retirement accounts decline as the safety net disappeared.

Gen Xers, in contrast, entered the workforce during the boom years between the mid-'80s and the late '90s, when the workforce, market and economy were thriving.

According to the study, these differences may explain why 65% of millennials said worries about the need for guaranteed retirement income to supplement Social Security kept them up at night, compared with only 45% of Gen Xers.

Likewise, 73% of millennials said they had a strategy to protect against outliving their savings, compared with 54% of Gen Xers who did. With the oldest Gen Xers about a decade away from traditional retirement age, advisors can help address this preparation gap, Nationwide said.

Among those respondents who had a strategy to protect against outliving their savings, more millennials than Gen Xers said their plan included these sophisticated solutions: