Advisor Expectations Higher for Gen X and Millennial Millionaires  

A new study shows that the face of wealth is changing and is beginning to “tip” to Gen X and Millennials (Gen Y), who look and act much differently than older generations of millionaires do.

Fidelity Investments’ ninth Millionaire Outlook study finds that today’s younger millionaires differ from older generations in that they expect higher investment returns, want their financial advisor to provide more comprehensive services and would find a new advisor if theirs was not using the latest technology.

The study notes that the ranks of Gen X/Y millionaires have more than doubled in the past five years, and the two generations represent both “an opportunity and a risk” for the wealth management industry. In 2012 they comprised 8% of millionaires, but now encompass 18%. By 2030, Gen X/Y will surpass Baby Boomers in terms of holding the most wealth in the country, according to data cited in the study.

Yet despite this increasing wealth, the findings show that only 58% of them are currently working with a financial advisor, down from 72% five years ago. “With the percentage of Gen X/Y millionaires using an advisor on the decline, the industry needs to take a step back and ask: What can we be doing to ‘tip’ these investors toward valuing advice?” says David Canter, head of the RIA segment at Fidelity Clearing & Custody Solutions. “Gen X and Millennials don’t manage their finances in the same way that their parents did – they want an advisor who will be their own personal CFO and organize and simplify their financial lives,” he adds.

Higher Expectations

Consider that Gen X/Y millionaires have higher expectations when it come to their advisors’ management of their portfolio. They expect investment returns to be 16% on average versus 7% for their Boomer counterparts, according to the findings. In addition, their portfolios are more aggressive, with 14% holding derivatives (6% of Boomers), 19% holding venture capital investments (6% of Boomers) and 16% holding foreign currency (5% of Boomers).

They also want their financial advisor to provide more comprehensive services compared to Boomers (62% versus 25%). Gen X/Y millionaires are also willing to pay more for an advisor if they help with reaching life goals in addition to financial goals (32% versus 19%).

Access to financial information is also key among Gen X/Y millionaires, as 53% of respondents said they would find a new advisor if theirs wasn’t using technology, compared to 29% of Boomers. Lack of web portal access to financial documents reportedly is cited as a key area of frustration.

To address these changing dynamics, Fidelity suggests that advisors:

  • Consider gathering feedback on your approach via client satisfaction surveys and advisory boards in order to tailor your services to this market. Nearly 70% of Gen X/Y millionaires referred at least one person to their advisor in the past year (versus 48% of Boomers).
  • Examine your book of business to see if you have relationships with your clients’ children in the Gen X/Y population. Nearly 50% are likely or very likely to meet with their parents’ advisor if recommended, but only 16% of financial advisors are actively targeting younger investors.
  • Ensure that you are providing online access to statements, reports and financial records, and are staying on top of the latest ways to enhance the client experience through technology.
  • Consider taking steps that go beyond money management and offer comprehensive services.
  • Use data aggregation tools to find outside assets and bring up the ease of one-stop shopping in conversations.

Fidelity’s 2017 study was an online, blind study conducted Jan. 18 through Feb. 13, 2017, with a sampling of 601 participants defined as millionaires with $1 million or more in total investable assets, excluding 401(k) and real estate investments.

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