Millennials, who now make up more than one-third of the U.S. population, rate taxes as their number one financial concern, more than any other generation, according to a special report by Nationwide Advisory Solutions.
The tax concern is surprising since millennials, those people 18 to 37 years of age, also are burdened by student debt, said Craig Hawley, head of Nationwide Advisory Solutions, a division of Nationwide based in Louisville, Ky.
Another difference between millennials and older generations is that they are more open to structured products such as annuities, according to the Advisor Authority study, “Looking to the Future—Reaching Millennial Investors,” which included 972 advisors and 872 investors with at least $100,000 in investible assets.
“I think millennials are worried about taxes as their first concern because they want to know how much money they will have left” at the end of the day, Hawley said. “This represents a substantial opportunity for advisors, who say adding new clients is number-one driver of profitability.
“Millennials are poised to grow more wealth and inherit their share of the $30 trillion great wealth transfer,” he added. “But this generation faces distinct challenges and fosters unique preferences, which advisors must understand in order to build productive relationships.”
Millennials harbor some risk aversion that is not apparent in other generations, therefore cash is king for them, Hawley said. They hold two to three times more cash than older generations. This generation wants a financial advisor to be a financial quarterback for them, not just a person dealing with market returns and planning for retirement, he added.
“There is a tremendous opportunity for advisors to help millennials start early and establish a lifetime of smart investing habits to reach their financial goals,” the study said.
The burden of student debt is not the first concern for millennials but it shows up as second in their list of financial worries, while Gen-X rates it as their fourth concern and it is far down the list of concerns for baby boomers, the study said. Healthcare is the younger generation’s third concern.
“Coming of age in the wake of 9/11, the Market Crash of 2008 and the Great Recession has impacted millennials’ financial concerns, investing habits and future earnings potential,” the report said. “They are proceeding with caution, and this aversion to risk may impact their ability to reach their future financial goals. Forty percent of these younger investors still do not have a financial advisor—and could benefit from long-term holistic planning.”
Although still young, millennials already are planning for retirement, which is listed as a major reason for hiring a financial advisor. Millennials are just as likely as older generations to say they have a plan to protect themselves from running out of money in retirement.