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How wise wealth managers can attract skeptical millennials


Millennials are too often written off as a generation of overeducated slackers who live at home into their 30s. And while few cynics will laugh over the coming years, millennials will laugh all the way to the bank. Here’s why: Millennials will receive the biggest transfer of private wealth in history and become the financial industry’s driving force.

How much wealth—and how big a force? A white paper by UBS recently noted that millennials are on track to hold $24 trillion of the world’s private wealth by 2020; other sources have the figure topping out at $30 trillion. Yet for those already investing or inheriting money, few run to financial advisors, even if wealth managers are eager to land a piece of the market.

Millennials not only possess different values but can also be skeptical of financial advisors. Many can’t relate to old-school philosophies, and a survey by Investment News found that two-thirds of children fire their parents’ financial advisor after they inherit their parents’ wealth. Harsh.

Thus those who want to earn their business in the coming years must do three things:

  • empathize with their challenges
  • make personal connections, and
  • demonstrate that they’re forward thinking

Generation DIY

Such proactivity begins with this foundational truth: Millennials are more likely than previous generations to take a “do-it-myself” mentality and trust their own stewardship first. Having witnessed multiple financial crises during their formative years, they can also have a jaded view of the establishment, banking industry and traditional markets.

And according to a recent Merrill Edge report, 80 percent of them believe they’ll see another recession in their lifetime. Three in 10 think it will happen in the next five years.

“Many of them graduated college during the [recession-era] financial crisis, so they can be a little skeptical and more hesitant to take on risk. They’re certainly more cautious,” says David Storch, CFP, Investment Associate at Rose Capital Advisors in Miami, Fla.

A recent student body president candidate at the University of Miami (where he graduated in 2016 with a finance degree), Storch falls on the younger end of the millennial spectrum. Like him, Jennifer Jackson has witnessed the realities of millennial finance professionally and personally.

Jackson not only serves as a millennial transition coach; she’s also a millennial who’s consulted with advisors for her own financial planning. She hasn’t always agreed with their advice.

And so she currently manages her own investments in low-cost index funds and considers herself “fairly conservative.” “I wasn’t old enough at the time to be investing but I was very aware of the recession, the loss of jobs and the skepticism,” she says. “It had an impact.”

What’s more, Jackson chafed at compensation structures that left her feeling pushed into certain investments. She may not know that under the Department of Labor’s new fiduciary rule—which has begun rolling out—wealth managers and financial advisors are now legally bound to put the client’s interests first.

The question is, have they done a good job of communicating this to prospective millennial clients? In a word, no.

Divergent values, expectations

No one benefits from painting all millennials with the same brush, wealth managers included. They span ages 20 to 36, possess vastly varying levels of wealth and can be in drastically different life stages.

While older millennials may share more in common with Generation X, younger millennials can lack historical perspective when it comes to returns. Companies they know best, such as Apple, Amazon and Netflix, have produced double-digit returns in recent years. “There can be unrealistic expectations,” Storch says. “People from now on think that’s going to be the case with their investments. Their expectations have to be aligned with reality.”

Regardless, millennials of all ages have high expectations for sustainability. They’re more inspired by social progressivism, sustainability and equality than by Gordon Gekko from the movie Wall Street. A study by Swell and Harris found nearly 80 percent invest in socially responsible or impact investing options, or plan to do so in the future. Chances are many wealth managers aren’t attuned to this, though.

“There’s no reason to invest with companies that don’t align with my values,” Jackson says. “There are so many options today.”

More rapport opens the door

Wealth managers who seek to reach millennials need to build rapport, leverage technology and demonstrate that they’re forward-thinking. A Twitter presence, blog and content geared towards their issues appeals far more than old guys in suits, smoking cigars and touting decades of professional investment experience.

Tara Falcone, CFP, a millennial and founder of ReisUp, says she has seen friends not move forward with a parent’s financial advisor because “they didn’t vibe with them.”

Falcone adds: “In some cases, the difference in age and vernacular can translate as condescension. In my experience, millennials prefer to work with someone who understands the stage of life they’re in.”

While elders in the field might tout clichés about building wealth as the endgame, Falcone has her capital-M Manifesto. She “vibes” with her age cohort not by sales pitch but storytelling:

“ReisUP is a tribute to my small hometown, to my grandparents whose entrepreneurial spirit inspired me at a young age, and to my father, Michael Reisbig, who was taken from this earth far too soon. The world lost an incredible mind and an all-around badass 13 years ago. But just as his memory has lived on in me, so will it live on in ReisUP.”

And while millennials labor under an entitlement stereotype, the fact is they face a historically high cost of living relative to incomes. They also pay a higher share of income for health insurance—and carry large amounts of student debt. According to the Federal Reserve Bank of New York, the average student loan payment for a 20-to-30 year old is $351 per month. Compare that to baby boomers attending college in the ’70s and ’80s: Back then, student loan debt was the exception, not the rule.

“How do you put yourself in the shoes of a 30 year old with a six-figure job but also six figures in student loan debt?” says Douglas Boneparth, CFP, President of Bone Fide Wealth in New York. “It’s extremely difficult to relate.”

Boneparth caters to the millennial market and says it can be challenging for advisors to come across as “believable” given the age gap. A report by Ernst & Young found that more than half of financial advisors are over the age of 50; nearly a quarter are past 60.

The most successful firms are hiring junior advisors to pave the way for millennial clients. At Rose Capital Advisors, 23-year-old Storch was hired in April 2016 and has unofficially taken on the role of working with the firm’s younger millennial clients.

For a generation “wary of the establishment,” simple conversation and rapport can go a long way. “They want to be able to connect with you on an individual level,” Storch says.

Don’t worry, be savvy with tech

As denizens of the Digital Age, millennials also expect a digitally engaged experience. They want custom-tailored advice, high levels of engagement and an advisor who is “as accessible as possible,” Storch says. Advisors don’t necessarily need to promote robot solutions, but shouldn’t be knocking technologies, trends or new ideas such as roboadvisors.

Think it doesn’t happen? “Talking to older financial advisors, some are more closed off to it and they make you not want to work with them,” Jackson says.

To that end, firms should stake out an energetic social media presence and use technologies that can maintain simplicity throughout the relationship, Storch says.

Boneparth is highly active on social media and gears his content and blog posts at the millennial audience and conducts speaking engagements at universities. He contends that “old school” advisors who think the game is about investment management have a “failing model.”

“Investments are a big part of the business and competitions,” Boneparth says.

“But as far as value, it’s about planning, advice and time savings. That’s what millennials are looking for.”

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Craig Guillot is a business writer who specializes in retail and finance. His work has appeared in such publications as Wall Street Journal, CNBC.comBankrate.com and Better Investing.

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