What they really need… and how you can attract, retain and drive ‘client satisfaction’ for these new investors
Louisville, KY—February 20, 2020—A new Special Report from the fifth annual Advisor Authority study commissioned by Nationwide Advisory Solutions, takes an in-depth look at the emerging market of Millennial (ages 18 – 38) and Generation X (ages 39 – 54) investors with investable assets of $100,000 or more—exploring the unique characteristics that differentiate them from each other and from their older counterparts. RIAs and fee-based advisors can tap into these insights to understand these younger generations and compete more effectively to win their business. Conducted online by The Harris Poll, the Advisor Authority study surveyed roughly 1,700 financial advisors and individual investors nationwide.
“The trends are well known. As Boomers shift into retirement at a rate of 10,000 per day, both Millennials and Gen Xers are poised to grow more wealth and ultimately inherit their share of the $30 trillion Great Wealth Transfer,” said Craig Hawley, Head of Nationwide’s Annuity Distribution. “The opportunity is huge, and our latest Advisor Authority Special Report uncovers the key factors RIAs and fee-based advisors need to know to unlock greater growth by attracting and retaining the emerging market of Millennial and Gen X investors.”
More than one-third of Millennials (39%) and more than half of Gen Xers (52%) still don’t have an advisor—and could benefit from long-term holistic planning—according to this latest Advisor Authority Special Report, “Millennials and Generation X: Targeting the Emerging Market of New Investors.” So, what do advisors need to know?
Different Factors for Attracting Millennials and Gen Xers
From choosing an advisor to making life choices, these two generations often take a different approach and often have a different point of view. The majority of Millennials say they are the primary decision maker in their household when it comes long-term financial planning (85%) compared to just over half of Gen Xers (55%). Likewise, 45% of Millennial investors have never married, compared to just 17% of Gen X Investors. Studies show that many Millennials are going solo—delaying the decision to marry, have children, buy a home and more—and an important reason why is their overwhelming student loan debt.
When it comes to choosing an advisor, year over year both Millennials and Gen Xers say that experience matters most (31% and 47%) and both include personalized advice for a holistic financial picture (28% and 25%) among their top three factors. But the factors influencing their decision to work with a financial advisor also reflect strong differences in values and priorities.
While more Millennials than Gen Xers cite socially responsible investing (20% vs 8%) and increased use of mobile technology (19% vs 4%), fewer cite a fee-based fiduciary standard (18% vs 27%) among the top three factors that influence their decision to work with an advisor. When targeting Millennial investors, this may reflect an important knowledge gap—presenting an important opportunity to educate them on the benefits of working with an advisor who puts the client’s best interest first.
Greater Optimism Does Not Mean Fewer Concerns
Despite their outsize debt and other financial challenges, more Millennials than Gen Xers had an optimistic financial outlook for 2019 overall (64% vs 49%). The fifth annual study also shows that more Millennials than Gen Xers had an optimistic outlook on the U.S. economy for the next 12 months (47% vs 31%). Yet, both Millennials and Gen Xers were equally concerned about a U.S. economic recession over the next 12 months (61% each).
Likewise, more Millennials than Gen Xers also had an optimistic outlook on the U.S. stock market for the next 12 months (53% vs 36%). Yet Millennials were more concerned than Gen Xers about a bear market in the next 12 months (61% vs 57%). Roughly two-thirds of Millennials and Gen Xers agreed that market volatility would increase over the next 12 months (67% and 62%).
Concerns about a declining economy, falling markets and market volatility can raise concerns about protecting assets and increase the need for guided advice. When asked the number-one benefit of working with an advisor when markets are volatile, Millennials and Gen Xers with a financial advisor report different views. Among those with a financial advisor, more Millennials than Gen Xers say the most important benefit is protecting their assets against market risk (23% vs 20%) tied with helping them stay focused on long term goals (23% vs 15%). Meanwhile, roughly one-third of Gen Xers (32%) say the most important benefit of working with an advisor when markets are volatile is to help them make more informed decisions, while only 15% of Millennials say the same.
Protect Against Top Concerns to Drive Client Satisfaction
Millennials and Gen Xers share similarities in their top financial concerns for the next 12 months, but the younger generation identified a wider range of issues among their top three. Millennials again say that taxes (31%) are their number one financial concern. Despite their younger age, longer time horizon and reputation as “young invincibles,” Millennials say saving enough for retirement (25%) and cost of healthcare (25%) are tied for second.
Protecting assets (19%) moved up to Millennials’ number-three concern from number-seven the previous year. Perhaps due to their growing concerns about rising volatility and a looming bear market, this younger generation seems to be taking protection seriously. Given their outsize debt, it is no surprise that Millennials say financing a home (19%) is one of their top three concerns and financing another large expense (19%) also tied among their top three.
Meanwhile, Gen Xers again say that saving enough for retirement (36%) is their number-one concern. Taxes (32%) are their number-two financial concern, moving up from number-three the prior year. The cost of healthcare (30%) moved to Gen Xers’ number-three financial concern, from number-two the prior year.
Protecting Retirement—and Addressing the Preparation Gap
Despite their young age and longer time horizon, Millennials are already thinking about retirement—perhaps more than some Gen Xers. Many Millennials came of age, graduated college and struggled to enter the workforce during the Market Crash of 2008 and the Great Recession, and watched their parents’ retirement accounts decline as the safety net disappeared. Meanwhile, Gen Xers entered the workforce during the boom years between the mid-80s and the late-90s, when the workforce, market and economy were thriving.
These differences may account for the fact that 65% of Millennials already say that concerns about the need for guaranteed retirement income to supplement Social Security keeps them up at night, compared to only 45% of Gen Xers. Likewise, nearly three-quarters of Millennials (73%) say they have a strategy to protect against outliving their savings, as compared to roughly half of Gen Xers (54%). With the oldest Gen Xers roughly a decade away from traditional retirement age, advisors can help address this preparation gap.
Among those who have a strategy to protect against outliving their savings, more Millennials than Gen Xers say their plan includes sophisticated solutions like Variable Annuities with Living Benefits (36% vs 27%), Deferred Income Annuities (DIAs, 30% vs 8%), Single Premium Immediate Annuities (SPIAs, 20% vs 11%), Qualified Longevity Annuity Contracts (QLACs, 27% vs 9%), and Contingent Deferred Annuities (CDAs, 20% vs 9%).
To learn more about younger investors, and how they compare to their older counterparts, financial professionals can download the Advisor Authority Special Report, “Millennials and Generation X: Targeting the Emerging Market of New Investors.”
For additional insights on the Emerging Market of Millennial and Generation X investors, financial professionals can also download the latest Advisor Authority infographic.
The fifth annual Advisor Authority study explores the investing and advising issues confronting RIAs, fee-based advisors and investors—and the innovative techniques that they need to succeed in today’s complex market. This is the eighth release and final Special Report from the fifth annual study.
About Advisor Authority: Methodology
The fifth annual Advisor Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide Advisory Solutions from February 15 – March 4, 2019 among 1,021 financial advisors and 824 investors, ages 18+. Among the 824 investors, there were 165 Millennials, 213 Gen Xers, 379 Baby Boomer and 67 Matures. Advisors are weighted where necessary by employment status and active management to bring them in line with previous years’ profile. Investors are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, household size, investable assets and propensity to be online to bring them in line with their actual proportions in the population. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
About Nationwide Advisory Solutions
Nationwide Advisory Solutions is a recognized innovator with a mission to help RIAs and fee-based advisors build their practice by helping their clients to potentially accumulate more wealth and reach their financial goals. Nationwide Advisory Solutions does this by developing and delivering value-added investment products, services and technologies that dovetail with fiduciary obligations—wrapped in an industry-leading customer experience. To learn more, please visit www.nationwideadvisory.com
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.
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