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Millennials Are Special but They’re Not All Alike

By Murray Coleman October 16, 2014

Marketers like to push low-priced investment products to millennials, a vast cohort that by some estimates includes more than 77 million young Americans. But new industry research shows many investors in their twenties and thirties are willing to pay for full-service financial advice. Not coincidentally, they’re the ones advisors want the most as long-term clients: the wealthier ones.

High-net-worth millennials, it turns out, have a lot in common with their elders; so advisors need not cook up a whole new approach to financial planning when working with them. Still, they share generational traits — mostly social — with their lower-asset peers. These traits call for sensitivity. “From my experience and our research, it’s clear that advisors need to make subtle adjustments about how they work with younger families,” says Brad DeHond, a Chicago-based private wealth manager at Morgan Stanley, whose practice manages $2.2 billion. “But they don’t need to be overly dramatic to still be effective.”

In a survey published earlier this month, Morgan Stanley Private Wealth Management found that ultra-high-net worth millennials display many of the same characteristics as their parents. For example, despite the brouhaha over digital and social media, 82% of young investors from families with $25 million and up expressed a desire for more in-person meetings with advisors. And, according to the report, 63% said working with an advisor is a necessity for making “sound financial decisions.”

Understandably, most millennials fly below traditional advisors’ radar. Just 11% have $3 million or more to invest, according to Bank of America’s U.S. Trust. Still, that translates into more than 8 million young people who have already come into serious money.

“High-net-worth millennials represent a vastly underserved part of the financial-advisory marketplace,” says Heather Evans, a Merrill Lynch advisor in Vienna, Va., with AUM of $450 million. With this group, she rarely lowers fees or makes exceptions to her account minimum. Instead, her firm is figuring out what wealthy young investors want from their advisors. For example, in a recent report, Merrill noted millennials’ sense of independence and reliance on technology. But rather than view these tendencies as a rejection of traditional advice, advisors simply have to make sure such clients are “shown the math,” says the report.

Heather Evans

Advisors should understand millennials’ keen enjoyment of networking, both online and offline, says Evans. She likes to host dinner parties and organize informal get-togethers where her young clients can meet one another and also have face time with centers of influence. “They seem to really appreciate when I reach out to help expand their own personal and professional networks,” she says. “It shows I’m not just focused on the X’s and O’s of family finances.”

Mike Abrams, a Wells Fargo Advisors planner in Palo Alto, Calif., whose practice manages $1.2 billion, says it’s important to give young, affluent investors plenty of space. Often, he’ll plant the seed of an idea and let it germinate. Then, he follows up after clients have had a chance to do their own research.

In many cases, Adams says, millennials whose wealth comes from parents or grandparents must manage their money within restrictions. One client’s trust stipulates that the young man can receive annually the same amount he earns — and no more. Other trusts specify how much clients may receive beyond what they need to cover family health and educational expenses.

“Most of my younger clients have to follow some sort of formal path set by their parents,” says Adams. “That tends to give their planning process more structure than working with mass-affluent millennials.”