Financial Advising Across the Generations: Exploring the Investment Mindset and Preferences of the Boomers, Gen X and the Millennials

Despite the emergence of countless new alternatives for investment advice and guidance, individual investors continue to value financial advisors and the distinctive level of support they provide in the pursuit of wealth and financial stability. However, advisors risk losing that foothold in the coming years if they do not adapt to investors’ changing preferences. This is especially true if advisors hope to develop an enduring connection with Millennials, the largest and fastest-growing generation of financial services clients.

A new white paper from The Center for Generational Kinetics and First Clearing, “What Does Financial Advice Look Like Across Generations?,” examines the financial advising needs and expectations of the three generations most active in investing today—the Baby Boomers, Generation X and the Millennials—and explores how advisors can provide service in the current climate. The report’s spotlight on investors on a generational basis reveals how the groups view three key questions:

  • What does financial security look like?
  • What’s the value of advice?
  • Where do investors go for advice?

Millennials will shape the financial services industry for the next 20 years as they gain earning power and seek investment help. In many aspects of their behavior and preferences, Millennials resemble Boomers and Generation X, but they also are coming of age in a time of rapid, transformative technological advances. As a group, Millennials have exponentially more options for accessing financial information and guidance than previous generations did at similar stages in their lives. These changes add a new dynamic to the relationship between financial advisors and their clients and potential clients.

What Does Financial Security Look Like?

Research contained in the white paper indicates that the definition of financial security varies by generation based on stage of life. Baby Boomers and Gen X define security based on having sufficient money to live comfortably, with Boomers more focused on having enough income for the future because they are beginning to move into the retirement phase of their lives —transitioning from the accumulation of money to the distribution of it. Millennials, on the other hand, define financial security in terms of the present. Their priority is financial stability right now, emphasizing paying the bills and other day-to-day obligations. Because Boomers and Gen X are further advanced in their careers and lives, they tend to have fewer concerns about day-to-day living.

Although they may define financial security differently, each of the generations cites saving enough money for a comfortable retirement as their primary goal for investing. Even Millennials, who are decades away from retirement, indicate that being prepared to retire one day is their chief reason for deciding to invest.The research demonstrates that different generations have different pain points about investing and retirement planning, typically tied to their stage of life, and identifying these drivers will help advisors build effective financial strategies for their clientele.

What’s the Value of Advice?

Financial advisors are the primary source of investment advice for Gen X and Boomers, but Millennials largely have not yet committed to an advisor or to a clear path for their approach to investment management. Some are even young enough that their parents still serve as a primary source for financial advice.

Essential to advisors building relationships with Millennials will be their ability to bring a more personalized approach to advising. Across the generations, investors frequently cite a desire to be treated as individuals and families rather than as mere customers. They want personalized guidance rather than formulaic, impersonal sales pitches. Although this preference has persisted for decades, it continues to prove elusive in practice, according to investors of all generations, who find themselves routinely facing sales tactics that boost a certain product over their interests.Less than 50 percent in every generation are feeling fully served by financial advisors in key value areas, including relating to lifestyle, relating to financial goals and knowing them and their family, according to the report.

With the increasing number of options at their disposal, Millennials could be the generation to look elsewhere if they do not feel as though advisors adequately attend to their needs as individuals, with guidance and advice tailored to their specific lifestyles and goals. In order to retain and build their clientele, advisors should build unique relationships with clients and eschew the “one-size-fits-all” approach that investors believe has too often marked their interactions with advisors, as noted in the white paper.

Where Do Investors Go for Advice?

The importance of trust partly helps explain why Millennials are more likely than other generations to turn to social networks, such as their friends or co-workers, for financial advice. Another factor is their stage of life, which also suggests why many Millennials say they are waiting to seek out financial advisors when they have more money to invest. Their current perception is that advisors are only needed when one has accumulated wealth.

Both of these characteristics represent sterling opportunities for advisors to make inroads with Millennials. The reliance on social networks suggests that winning one Millennial could lead to winning a host of their social contacts. Similarly, the generation’s belief that investing is only for the wealthy provides an opportunity for advisors to educate younger investors about the value of investing small and early to create gains over time—that can also lead to long-term client loyalty.

Millennials are a generation raised on the convenience of the digital world and the abundance of information that lies within.According to the white paper, the younger the investor, the more likely they are to invest online, and Millennials as a group more frequently invest online with little or no direct involvement from an advisor — though not at numbers substantially higher than other generations.

Surprisingly, Millennials and others do not appear to treat self-directed investing options as replacements for advisors, but as something more complementary. In fact, each generation indicated that they view a financial advisor as the best source for long-term strategic advice. Seventy percent of Millennials say they would prefer receiving long-term, strategic advice from an advisor than from an online source. That’s the highest mark of the generational groups surveyed. For Millennials, who are still learning the intricacies of investing, accessing online investment sites can serve as a beneficial form of education that helps boost their confidence and makes them more comfortable to approach an advisor for personalized help.

However, it is important to emphasize that Millennials and others all express an interest in using automated advisors in the future, so advisors who do not know, understand and acknowledge online investing will risk appearing out of touch to their audience, or, even worse, failing to meet investors’ needs and giving them a reason to opt for online options instead.

Investors’ desires and expectations are changing, and technological advances mean investors no longer have to turn to financial intermediaries for the advice they want. As such, it’s becoming more and more critical for the financial services industry to recognize and respond to these trends. This study suggests that the industry faces an issue larger than the ones it has in the past: the need to listen and respond to the desires and expectations of all clients, no matter their age group.

To learn more about generational approaches to investing and financial advising, download the white paper, “What Does Financial Advice Look Like Across Generations?”

Source: The Center for Generational Kinetics

For broker-dealers and financial professionals only. First Clearing does not provide services to the general public. First Clearing, LLC is a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. First Clearing Correspondent Services, a division of First Clearing, LLC, member FINRA/SIPC. ©2016 First Clearing, LLC.0516-02634



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