Many firms and practices may have a set of scripts and procedures that they ask advisors to adhere to. They may regard such tools as “best practices,” produced and honed over years and possibly decades of servicing clients.
But when advisors find that such “tried and true” approaches don’t work on millennials, they shouldn’t be surprised, according to an article published on Entrepreneur.com
. Instead, they should pay attention to trends that affect millennial attitudes toward financial advice:
Clients attached to advisors, not firms: study
- Reduced attention span – A Goldman Sachs report shows that more than 30% of millennials would commit to no longer than 15 minutes in a session with a financial advisor. It might seem like they’re being less receptive, but it could also be due to their improved access to information. With all the information about financial products, savings and interest, and approaches to debt payment online, it’s easier for them to get informed without disclosing their personal financial issues. The challenge for advisors will be to add value to that information and turn it into practical knowledge.
- Lack of faith in the stock market – While older generations also struggled through the financial crisis, it was much more transformative for millennials. Many of them got introduced to stock market investing as they watched a recession unfold. “It makes sense for a young person to raise an eyebrow at being told the best thing they can do with their money is put it in stocks when they saw their parents lose everything doing just that,” said Andrew Canter, founder and CEO of Canter Companies. That makes many millennials want to limit their exposure to the financial markets.
- Desire for personal advice – According to a Harvard study, only 11% of millennials trust Wall Street, and they are more than twice as likely to approach their parents as they would financial advisors to consult about financial matters. This will be another significant barrier to financial advisors, who’ll have to put more effort into earning the confidence of current and prospective millennial clients.
- Preference for customizable online options – As digital natives who grew up with computers, cell phones, and internet connections, millennials are very comfortable with – and often prefer – technology to communicate and conduct transactions. This has made robo-advisors very popular; aside from the fact that they are cheaper and usually require no minimum investment, these platforms let millennials run their affairs in the remote and convenient way that they’re used to.
- Gravitating toward flexible investments – Millennials are also opening up to more flexible, non-traditional investments that can be made online. Aside from ETFs hosted on robo-platforms, one new avenue that’s reportedly gaining traction with younger generations — but not as quickly with planners and investment advisors — is crowdsourced real estate. “[M]any companies now offer non-traditional investment options, allowing people to own small pieces of much larger investments,” Canter said. “For a young investor who is eager to learn the ropes with a small amount of capital, it’s a great place to start.”
Advisor firms challenged by inter-generational gap