Much like the way Winston Churchill once characterized Russia, millennials are often considered a “riddle, wrapped in a mystery, inside an enigma.”
The financial world has been trying to understand this tech-savvy, minimalistic generation for years and now, research is finally shedding some light on this elusive group.
After embarking on the Guardian Study of Financial and Emotional Confidence in 2016, Guardian Life Insurance Company of America realized it needed to better understand this emerging group of investors that already makes up 14 percent of its clientele.
Guardian’s most recent study, Millennials and Money: Understanding What Drives Financial Confidence explores what millennials want and need to achieve long-term financial confidence.
Conducted in February, the study compiled online interviews with 3,061 Americans with a household income of $50,000 or more. Participants ranged in age from 21 to 72 and worked full-time or part-time, but never retired.
The breakdown of respondents:
- 2,023 millennials (37 percent)
- 575 generation X (37 percent)
- 463 baby boomers (27 percent)
The study interviewed participants across different generations. Guardian wanted to see if, when it comes to money, millennials really are that different from their predecessors.
Some of the study’s findings were a shock to Guardian, Erin Meijer, director of thought leadership said. The generation often described as “digital zombies” turn out to be nothing of the sort when it comes to working with a financial advisor.
“We were really surprised to see how much of an important role the local human experience played in the millennials’ desire to work with a specific advisor,” said Meijer. “Having an advisor that’s active in their community, committed to charitable causes – kind of reflecting their own priorities and who takes time to meet with them face-to-face – were key factors in how much satisfaction they felt with that advisor.”
Millennials prefer to work face-to-face with an advisor 45 percent of the time compared to 23 percent who said they prefer to stay in touch with their advisor via email.
When it came to major financial priorities, millennials weren’t that different from other generations. Over half (55 percent) said that keeping up with monthly expenses was their first priority. A close second was the 45 percent that said saving for a major purchase was their biggest priority, leaving 31 percent of the demographic who makes paying off student debt their biggest financial priority.
Like other industries, finance has been pushed to include a larger digital presence. Meijer said that will continue to increase, but that push is not only caused by millennials.
“Guardian has been digital and tech focused, but as an industry insurance always tends to lag pretty far behind everyone else,” said Meijer. “It’s lit a fire, if you will, to say that we have to kick it up a notch if we are going to properly serve this generation.”
Advisors say the advice they give doesn’t change across generations. Ashley Foster, a millennial and financial planner in Houston, Texas said, “Being a millennial does not shape the advice I give. Saving more, paying down debt, investing in your 401(k)/IRA, this advice works no matter what generation you are.”
According to Foster, the only thing that changes is how the information is delivered. Foster believes millennials want three things from their advisors: access, collaboration and simplification.
“Millennials want to collaborate, not be told what to do. They want a coach, not a salesman/woman. They want to have instant access to their financial life via an app. They want to work with a trusted fiduciary. They do not want to be sold product. And they do not want to be given a 50-page financial plan to pore over after meeting with you,” said Foster.
Advising millennials comes with a unique challenge – managing student debt. While only 31 percent of millennials in Guardian’s study cited student loans as a financial priority, advisors say it’s a huge consideration when taking on millennial clients.
“Millennial’s have different concerns versus their parents at their age. Student loan debt is a big one. And many advisors fail to discuss this with millennial clients,” said Foster.
Darin Shebesta, a millennial and financial advisor, said that he’s puzzled by Guardian’s findings- specifically those surrounding student loans. Shebesta creates comprehensive plans to tackle student loans and high-interest accounts first. When it comes to debt management with millennials, Shebesta says sometimes, it’s a trade-off.
“We have that conversation about is it in your best interest to be paying that off,” said Shebesta “versus putting that money in a Roth or putting that money in a 401(k).”
Shebesta says that long-term investing sometimes gets put off because of the urgency some clients feel to get out from under student loans.
Millennials Are Built For Business
Despite looming student debt, millennials are succeeding in a few key areas.
“Millennials are business owners at higher rates than any other generation,” said Meijer. “They seem to have this entrepreneurial streak. It’s these millennial business owners that seem to be the well-positioned for achieving financial confidence. They’re doing a lot of things right.”
Of millennial business owners, 82 percent consider themselves on track to meet their financial goals.
Shebesta supports that idea, saying that many of his millennial clients are business owners, entrepreneurs and attorneys.
“I have a lot of millennial clients who are attorneys,” Shebesta said. “Higher educated, entrepreneurs and business owners make up my millennial market.”
The generation that gets blamed for dismantling chain restaurants, beer companies and the diamond industry doesn’t seem to have an interest in crushing the world of financial planning.
In fact, Guardian’s research shows that millennials are receptive to advice from financial professionals and want a plan in place to manage their assets.
About 75 percent of millennials are likely to work with a financial advisor versus 69 percent of gen Xers and 66 percent of baby boomers.
“We’re really surprised and happy to see that Millennials are valuing having a strong plan, said Meijer. “It’s a great opportunity for us as an industry.”