Do Financial Advisors Understand Millennials?


By Bjorn Forfang/ CFA Institute

Millennials are expected to inherit more than $40 trillion over the coming decades—a staggering amount of generational wealth transfer. Born between 1981 and 1996, millennials may be the most discussed yet misunderstood generation in decades. How many of us have said “Ah, millennials” and rolled our eyes?

This is a short-sighted view. It clearly behooves financial professionals to take the time to understand this generation in order to retain and grow these assets.

The good news is that millennials trust the investment management industry much more than baby boomers and Gen Xers, according to a CFA Institute “The Next Generation of Trust” report. For millennials, the sting of the global financial crisis was not as lasting or widely felt as it was for other generations.

And 10 years after the Great Recession, that crisis continues to fade from their collective memories. Case in point: our study found that 55 percent of retail millennial investors said they had trust in financial services. That comparable number was 40 percent for baby boomers. That’s a significant difference—and a myth-buster as millennials are typically categorized as wary of the financial services industry. For advisors, that level of trust represents a market opportunity upon which to capitalize.

In a separate study on millennials by CFA Institute and Finra, we found that the stereotype of millennials as aggressive, knowledgeable and confident investors does not hold true. According to the research, the majority of millennials lack confidence in their financial decision-making abilities and, surprisingly, have little interest in robo-advisors. Despite being denizens of the digital world, millennials said they prefer to work in person with a financial advisor.

This all builds the case that, contrary to popular belief, millennials have largely positive views of financial advisors and prefer to share decision-making with an advisor. Nearly three-quarters of Millennials who work with a financial professional reported being very or extremely satisfied with their financial professional. But perhaps not surprisingly, they are very focused on costs and fees. This was seen as equal in importance to an advisor’s level of experience.

All considered, financial advisors who have not yet tapped into this market will need to create hybrid or a la carte models to cater to differing tastes and communication preferences. It is not a myth that millennials are technologically savvy, open to new ways of doing business and innovative means of interacting with financial firms. We also know that effective use of technology increases trust in a financial advisor or firm.

At the moment, for many clients, the combination of technology and advice holds the key to the most productive and trusting relationships, particularly with millennials.

Artificial intelligence and machine learning do not—yet—have the ability to listen, empathize and explain the rationale behind recommendations and decisions, so let’s not give up on humans just yet. Investment professionals who take the time to demonstrate that client interests come first and those who use technology effectively can expect to earn and keep the trust of millennial investors.

Bjorn Forfang, CFA, is deputy CEO of CFA Institute, the premier global association of investment professionals that sets the standard for professional excellence and credentials.