As millennials enter middle age, they’re no longer the snot-nosed young Turks with aspirations to change the world and few assets to their names, a new report says.
In fact, at certain levels of wealth, nearly three-quarters of North American millennials are using the services of a professional financial advisor, according to Five Financial Truths about Millennials at 40, a recent report from Natixis Investment Management.
In North America, 72% of Natixis’s millennial respondents reported having a financial advisor, a higher proportion than Generation X (66%) or baby boomers (70%).
“We tend to think of younger generations as digital first because they have grown up with digital, and the assumption is that everything gets done with a phone,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight. “As they get older, life is more complicated and their circumstances are less cookie-cutter. Everything relates back to their income, their goals, and themselves, so millennials are turning to financial professionals.”
In its global survey of 2,459 participants with at least $100,000 in investible assets, taken in March and April 2021 and further analyzed in March 2022, Natixis uncovered some key truths about millennials as they age.
Robo-Advisors Aren’t Enough
Only 5% of the North American millennial respondents work solely with an automated investment service like a robo-advisor. While more than half of them prefer to receive advice through digital or online channels, they still want to know that the information is coming from a human being, according to the survey.
“Higher-net individuals will work with advisors, with maybe a robo-advisor as a secondary advisor,” said Goodsell. “Financial planning is on their minds, that doesn’t come from an algorithm.”
Nearly half of the millennial respondents said that they don’t really trust algorithms or AI to make investment decisions. By comparison, of those who work with financial advisors, 92% said they trust their advisor.
The most important components of a financial advisory relationship, according to the respondents, are helping to manage volatility, discussing financial plans with family and having access to someone who listens. Their biggest financial fears are volatility, tax increases and a slow economic recovery.
“Social media isn’t going to guide their financial decisions any more than robo-advisors,” said Goodsell. “Millennials are savvy enough to know you can’t Yelp recommendations for your financial portfolio.”
Millennials Are (Mostly) Risk Averse
Nearly half of the North American millennial respondents, 48%, said risk management is the most important factor when allocating assets. Millennials are most likely to define risk as market volatility.
“For millennials, risk is a very short-term question as opposed to an issue that might be 20 to 30 years out,” said Goodsell. “In that way, they’re actually quite conservative. The expected coming of age for this generation was marked by 9/11 and then their thinking was further impacted by the global financial crisis, the dot-com bust and Covid-19. They saw what parents and/or older siblings went through during these crises and it shaped their sense of risk. The mindset of millennials is more similar to Great Depression-era people versus baby boomers or Generation X.”