Welcome to Financial Advisor IQ

Seven Myths Versus Realities About Millennials and Investing

By Rita Raagas De Ramos October 5, 2018

Millennials don’t have enough knowledge to invest, lack the confidence to make investment decisions and aren’t as interested in robo-advisors as previously assumed, according to new research sponsored by the CFA Institute and the Finra Investor Education Foundation.

The results of the new research – "Uncertain Futures: 7 Myths About Millennials and Investing" – are “counterintuitive,” Finra CEO Robert Cook said at the Sifma annual meeting in Washington, D.C earlier this week.

After all, conventional wisdom has painted a picture of millennials as aggressive, knowledgeable and confident when it comes to investing, according to the new research.

"This study dismisses many of the assumptions that are commonly held about millennials and why many of them are not investing," Finra Foundation President Gerri Walsh said in a statement. The foundation supports research and projects that help Americans gain the knowledge, skills and tools to make sound financial decisions.

"These findings help us better understand the needs and wants of millennials to further enhance investor education efforts that will engage millennials in the financial markets,” Walsh added.

The new research is based on a survey of 1,814 millennials conducted from May 15 to June 5.

Here are the seven myths versus realities identified in the new research.

Myth 1: Millennials have lofty financial goals

Reality: Contrary to conventional wisdom, millennials expect to retire at the standard age of 65. Non-investing millennials have very modest financial goals and are focused on surviving month to month. In contrast, the financial goals of millennials with taxable accounts mirror those of Gen Xers and baby boomers, such as "saving enough to retire when I want and live comfortably."

Myth 2: Income and debt are the key barriers to investing

Reality: While income and debt are important, 39% of millennials without taxable investment accounts say not having enough knowledge about investing is an important barrier.

Myth 3: Millennials are overconfident in general, so they’re probably overconfident about investing

Reality: Far from being overconfident, only 21% of non-investing millennials and millennials with only retirement accounts are very or extremely confident about making investment decisions. This figure increases to 47% for millennials with taxable accounts.

Myth 4: Millennials are skeptical of the financial services industry and by extension, financial professionals

Reality: Millennials acknowledge and respect the expertise financial professionals can provide. Nearly three-quarters (72%) of millennials working with a financial professional are very or extremely satisfied with their financial professional. Only 15% of millennials not working with a financial professional cite lack of trust as a reason.

Myth 5: Millennials overestimate the investable assets needed to work with financial professionals

Reality: Millennials actually underestimate the investable assets needed to work with a typical financial professional. Twenty percent of millennials believe there is no minimum amount needed to work with a financial professional. About six in 10 believe a financial professional would work with them if they had $10,000 or less to invest. Millennials also lack guideposts for pricing financial advice. Forty-two percent of millennials don’t know what financial professionals charge for their services. When asked to estimate, they guess high: 77% believe financial professionals charge 5% or more of assets under management.

Myth 6: Millennials gravitate toward electronic communication and robo-advisors

Reality: Despite their affinity for technology, 58% of millennials prefer to work face-to-face with a financial professional, on par with baby boomers (60%) and Gen Xers (58%). Only 16% of millennials show strong interest in using robo-advisors.

Myth 7: Millennials are all the same and have similar investing attitudes and behaviors

Reality: This is not a homogenous group. For example, urban millennials are 50% more likely than rural millennials to own taxable investment accounts. Thirty-three percent of male millennials are extremely or very confident in their financial decision-making, compared to only 23% of female millennials. Twenty-eight percent of white millennials have taxable accounts compared with 20% of African-American millennials.