A New Era of Wealth Management Heralded in by Millennials

A millennial looking at a graph on a laptop.

Millennials are well informed, tech-savvy, and eager to be regarded as individuals rather than as just part of the general audience. (Image: via Unsplash)

The millennial generation is taking its first steps in the investment scene, and will soon become the dominant force in the industry. According to a report by Accenture, there are 92 million millennials in the United States who make up about 30 percent of all investors.

Millennials’ investments

Unlike Gen X’ers and Baby Boomers, Millennials tend to be more tech-savvy with their investments. Almost 67 percent want a computer-generated recommendation as a component of their digital investment package. More than 60 percent of them want companies to gamify their investment education and expect them to offer a platform that incorporates social media and sentiment indices. Six out of 10 Millennials feel that they have a good idea about their holdings and know their investments as well as professionals.

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Compared to Baby Boomers, Millennials are two times more likely to invest in exchange-traded funds (ETFs), and also show a high interest in commodities and options. “Millennials are far more likely to regularly discuss fees than other investors; 41 percent do so quarterly versus just 14 percent of Baby Boomers. Four out of 10 are willing to pay for quality service and the assurance they can pay for important events in their lives. A flat fee seems fair to half of the Millennial investors if it is based on the number of meetings. Millennials have little experience with a commission fee model like Baby Boomers do,” according to a report by Accenture Consulting.

In the past, investment companies relied on advisors to manage their clients. But with Millennials, this system is breaking down, as just 20 percent admitted that they work with an advisor exclusively. Moving forward, the increasing reliance on digital platforms will shorten the role of advisors. As such, firms will have to develop better AI tools to allow their Millennial clientele the freedom to research and decide on their investments.

In the past, investment companies relied on advisors to manage their clients but millennials prefer digital platforms that give them the freedom to research and decide on investments for themselves.
In the past, investment companies relied on advisors to manage their clients, but Millennials prefer digital platforms that give them the freedom to research and decide on investments for themselves. (Image: Screenshot via YouTube)

The Millennial generation has a high propensity toward learning how to manage cash flow and do proper budgeting. Companies can assign their advisors to help Millennial customers in this regard. Millennials tend to be distrustful of large brands when it comes to money. Many seek to develop a real, close relationship with the investment company holding their assets. As such, Accenture advises firms to prioritize relationship-building with their new clients.

Belief-driven

Millennial investors are more belief-driven than any of the previous generations. According to Lule Demmissie, managing director of investment products and guidance at TD Ameritrade, Millennials are interested in making proactive investments and want to bet their money on companies that seek to bring social change. “There’s definitely a generational divide… For Millennials, it was about making an impact. If you looked at the Boomers, it was more about, ‘Did it align with my values?’” she said to Market Watch.

A 2017 report by Morgan Stanley found that Millennials are twice as likely to make environmental and social investments compared to other investors. A study by Fidelity Investments showed that 77 percent of affluent Millennials wanted to invest in such causes provided that they generate a good return. Putting their money in companies like Tesla, which promises to create pollution-free vehicles, interests a millennial much more than investing in the oil and gas industry. Companies that make social investments to better the lives of the community they operate in are also attractive to the new generation of investors.

A 2017 report by Morgan Stanley found that millennials are twice as likely to make environmental and social investments as other investors.
A 2017 report by Morgan Stanley found that millennials are twice as likely to make environmental and social investments as other investors. (Image: Screenshot via YouTube)

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