As millennial investors go, the stereotypes run as rampant as those about the age cohort itself: They love technology. They’re spoiled. And they don’t trust the financial services industry. Period. That is: They’d rather use a smartphone to invest via app than to actually call a financial advisor.
Yet if you seek out experts within the investment world, you’ll find that the truth is much more complicated — especially when one of those authorities, Brian Barnes, also happens to be a millennial.
“It’s a myth that millennials are different than other generations,” says Barnes, founder and CEO of online broker M1 Finance.
And to that end, he lists things millennials want that aren’t much different than for the rest of us: convenience, automation and low trading costs.
Then again, it’s not as though millennials are carbon copies of baby boomers, either. And thus paradoxes arise, because millennials have investment needs that reflect their particular time and place in life.
[See: 7 Stocks to Buy for the Baby Boomer Retirement Wave.]
“If the investment community wants to serve millennials, they’ll need to improve their offerings to make them more attractive,” Barnes says. “The field is more concerned with maintaining their high fees and margins than delivering true value. They should focus on how to help as many people with their finances as possible, at the lowest cost.”
There you’ll find some agreement among industry professionals, and in some corners a refreshing dose of empathy.
“In my experience, millennials are tech-savvy and are somewhat distrustful of the industry,” says Scott Mazuzan, a certified financial planner and private client advisor with F.L.Putnam Investment Management Co. in Portland, Maine.
Those characteristics, Mazuzan says, “are colored by the times in which they came of age. They matured alongside the explosive mobile computing and the internet. And their impressions of the financial services industry are punctuated by the tech bubble, Ponzi schemes, the financial crisis and the Great Recession.”
So as it turns out, it may not so much be that millennials don’t understand the value of a financial advisor as financial advisors don’t understand what that generation has gone through.
“Investment professionals struggle with millennials for one simple reason: The moment millennials began pouring into adulthood, their job security and financial stability were ravaged by the Great Recession,” says Chuck Underwood, a pioneer in generational study and the author of “America’s Generations in the Workplace, Marketplace and Living Room.”
Nor do other corners of the world seem to show restraint when it comes to nickel and diming millennials — or perhaps more accurately, burying them in enough nickels and dimes to fill a U.S. Mint.
Compared to the boomers and Gen Xers that preceded them, millennials labor under a staggering amount of student loan debt — an issue too many higher education institutions have responded to by ignoring it, while continuing to jack up tuitions year after year.
PwC’s 2016 Employee Financial Wellness Survey tells a sobering story: Forty-two percent of millennial employees have a student loan, and for 79 percent of them, their loans have had a moderate or significant impact on their ability to meet their other financial goals. Also, 63 percent of employees with student loans have saved less than $50,000 for retirement.
[See: 10 Student Loan Facts College Grads Need to Know.]
Meanwhile, the average loan debt has soared past $30,000 per student, according to The Institute for College Access and Success. That’s a figure to rival the starting salary of many a millennial.
So forget about investing to buy a dream home: How about settling for paying the rent on a mediocre apartment? Or: Investing in the bottom line of Amazon (ticker: AZMN) by purchasing ramen noodles in bulk? A millennial pulling down $30,000 a year, and somehow saving 10 percent of her salary for investment, couldn’t even afford five shares of the company.
As for that entitlement stereotype, there may exist of grain of truth in it — though the reality, as investment experts see it, overwhelmingly suggests otherwise.
“They still long for a personal connection, altruism and a sense of meaningful contribution and participation,” says Ken Stout, founder of GrowthFountain, an equity investment platform for startups and small businesses. “Investment pros can help by seeking stories with elements of meaning and altruism. In my humble opinion, these trump the potential for financial gain.”
That’s right: Many millennials embrace altruism. Making that connect with investment might seem like a too-tall order for financial advisors trying to sharpen a sales pitch. But without at least a feel for it — expressed in socially conscious investment options, for example — a dialogue is unlikely to start at all, let alone get off on the wrong foot.
Stout puts it this way: “Millennials have different motivations — which often do not include financial return — and which make it difficult for older generations to relate or understand.”
Yet sometimes, the reasons millennials live as a generation apart have more to do with convenience than far-reaching social and economic issues. After all, nothing beats the convenience of investing via smartphone or laptop, and many entrepreneurs in financial technology (or FinTech) are responding to this need in creative ways.
“The service offered by older companies is the equivalent of rotary phones to millennials,” says Carol Fabbri, managing partner of Fair Advisors in Denver. “Big banks make money by offering a lot of service and earning a lot of money from a few wealthy people. Roboadvisors earn a little money with very little service for a lot of people.”
Yet as Fabbri and many experts observe, automated platforms can’t offer the sound advice on sticky financial issues and investment that real people can. Is it that millennials miss that point? Or that the industry hasn’t been proactive? More than a few see it as the latter.
[See: 8 Ways President Donald Trump Will Affect Wall Street.]
“A third option should exist that gives regular service that is backed up by exceptional technology,” Fabbri says. “And it isn’t there right now.”
To explain it another way, technology supplies convenience while the human touch offers experience. But with the bridge between the two not so easy to cross — and mobile-based technology oh-so-convenient — millennnials who grew up in a deregulated mess of things may just choose to fend for themselves, phones at the ready.
And with Congress set to roll back the Wall Street regulations of the last decade, millennials hoping to avoid that nightmare again might give financial advisors a rude awakening.
“The investment landscape has already shifted,” Barnes says. “Brokers, advisors or professionals that fight the trend are going to have a very challenging road ahead of them.”
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The Paradox of Millennial Investors originally appeared on usnews.com
