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It Pays to Understand Millennial Investors

April 11, 2013

Two recent studies hint that advisors have a prime opportunity to grab the attention of cautious, finicky Gen Y investors. And it’s important to court them through interactive and social media, including online video, not just traditional outlets, both reports conclude.

A Cogent Research study of 4,164 adults with more than $100,000 to invest found that 29% of the Gen Y cohort — born between 1982 and 1994 — has already surpassed that benchmark, and investors younger than 30 account for nearly 10% of the affluent-investor population. In both average total net worth and investable assets, Gen Y beats the older Gen X (see chart), most likely because Gen Yers are inheriting assets, not earning them.

But Gen Yers, also known as the millennials, don’t think like their predecessors, according to Cogent’s report, “Building a Pipeline with Young Investors.” They swing to both ends of the investing spectrum, willing to experiment with the likes of ETFs and hedge funds, while at the same time setting aside one-third of their assets in much lower-risk investments. That caution is closer to the Boomer mindset than to Gen Xers’ — a result of Gen Y’s coming of age in the volatile years since the 2008 financial crisis.

Affluent Gen Yers are also fickle when it comes to their advisors. For example, 81% use advisors but won’t necessarily follow them to a new firm; 31% report using five or more advisors; and they like to make some decisions on their own, Cogent found.

Cogent’s findings are in line with those turned up by Accenture in a February report, “Generation D: An Emerging and Important Investor Segment,” which indicated that millennials invest more conservatively and trust financial advisors less than either Baby Boomers or Gen Xers. They are also more inclined to consult other sources before making a financial move, the survey of more than 1,000 high-income U.S. investors found, and more determined to master investing skills themselves.

The two studies’ results may help explain why Gen X and millennial financial advisors are showing some advantages over Boomer colleagues. Writing for Forbes.com, J. Maureen Henderson notes that a new Fidelity study found that Gen Y and Gen X financial advisors are bringing in more client assets — an average of $8 million more within their individual businesses — than their Boomer colleagues, and racking up three times as many client referrals.

Not all of that is attributed to the natural hustle to grab new business by the younger advisors. The study also found that the millennial advisors have adopted new technologies to make their work more efficient, are more likely to use online marketing tools and — appealing to the Gen Y inclination toward self-education — have a more collaborative approach to working with clients.

By Elizabeth Jensen
  • To read the Cogent Research article cited in this story, click here.
  • To read the Accenture article cited in this story, click here.
  • To read the Forbes.com article cited in this story, click here.