When it comes to figuring out why so many millennials haven’t started investing, the majority of advisors and the financial industry have it all wrong, according to a new study.
While conventional wisdom paints a picture of millennials as aggressive, knowledgeable and confident when it comes to investing, new research finds that the majority of millennials lack confidence in financial decision-making and show little interest in robo-advisors. Moreover, despite coming of age in a digital world, they prefer to work face to face with a financial professional.
The report from the CFA Institute and Finra Investor Education, entitled “Uncertain Futures: 7 Myths about Millennials and Investing," essentially turns common wisdom about millennial investors on its head, which is a dicey proposition considering the generation stands to inherit a whopping $40 trillion.
"This study dismisses many of the assumptions that are commonly held about millennials and why many of them are not investing," said Finra Foundation President Gerri Walsh. "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."
As it turns out, there are actually three subsets of millennials—those with no investment accounts, those with only retirement accounts and those with taxable investment accounts (most of this group also owned retirement accounts)—and they have very different goals and habits, according to the study.
"By providing insights into investment preferences and concerns, this research can help financial professionals engage and better serve the needs of the next generation of investors, ”said Bjorn Forfang, deputy CEO of the CFA Institute.
These were among the study's findings:
• When it comes to working with a financial professional, 58 percent of millennials say they prefer to work face to face.
• Millennials who do invest more often start when they are young, before age 21.
• Innovations in investment products and services currently hold limited appeal for millennials.
• Forty-six percent of millennials with investment accounts cited parents and family as key factors in their decision to start investing.
The survey also debunks the following myths about millennials and their investing behavior:
Myth 1: Millennials have lofty financial goals. Contrary to conventional wisdom, millennials expect to retire at the 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."