Millennials are richer and want advice

The wealth of millennials is growing faster than that of any other demographic group. They want advice and now want to pay for it.

This is the result of a report by Cerulli Associates published in mid-August. The consultancy said Millennials in its research had an average net worth of more than $278,000 in 2021, reflecting a 23.1% annual increase since 2016. This is a rate of higher growth than that enjoyed by other generations. The company also said that 59% of millennials identify as advice seekers.

Results are from “The Cerulli Edge—US Retail Investor Edition” for the third quarter of 2022.

“While millennials have historically had a high rate of direct use of provider platforms, resulting in substantial targeted marketing from brokerage platforms and digital advice providers, they are increasingly demanding advice more personalized, including comprehensive financial planning,” the report said.

Part of it has to do with where millennials are in their lives. This generation, which the company defines as those between the ages of 25 and 41, is in a place where it makes decisions about starting a family, buying a home, getting married and priming. of retirement accounts – and thus raises all sorts of questions that could make a robot adviser shrug his shoulders.

The advisers they’re likely to meet first are those associated with banks, says John McKenna, research analyst at Cerulli.

“That makes sense,” says McKenna Financial Advisor. “It’s your first interaction, you walk to your local Bank of America. You walk through the door and say I want to open a checking account, I want to open a savings account, I want to open a credit card. … Over time, you begin to meet the bank’s advisory team. You are already there. The bank says: “Maybe you would like more advice on things like mortgage rates, maybe managing 529 plans, maybe managing savings.”

As things progress and millennials get richer, they’ll likely start to wonder whether they should go to independent advisors, full-service brokers, or a specialist.

“People aren’t in love with their deposit bank,” says McKenna. “It’s very transactional. It’s “I want to get money out.” You withdraw money. Thanks. I have my money. There’s not a lot of emotion there. But when you speak with an advisor, it’s personal. He knows you. You know him. You enter into conversations. You start to understand him, he starts to understand you.

This emotional connection is what can keep an advisor going for decades where transactional relationships cannot, McKenna says.

Cerulli said in his report that less than 10% of millennial households had more than $100,000 in total financial assets in 2016, but that figure rose to 25% because the market appreciated and the millennials were able to save more. This increase means that more of them are falling into the affluent and affluent categories, where people are more likely to seek financial assistance.

But counselors working with this group are going to need to know how they think. Millennials naturally want an online presence and digital access to their finances. But they’ll also want their advisors to understand things like cryptocurrency because, as younger investors, they have longer investment horizons and likely a greater appetite for riskier assets. In fact, Cerulli said, a quarter of affluent millennials in the Cerulli Report said they owned crypto in 2021, and they are the group most likely to bring crypto assets with them into a new advisory relationship.

“Crypto is not going to go away,” says McKenna, adding that young people who have been following it for a few years have seen the price skyrocket and they are likely to ignore the current crypto winter when they see that huge institutions like Fidelity are getting involved and the asset is validated by the formation of exchange traded funds.

“It’s getting a lot more formalized, especially as institutions are now making serious investments in crypto,” McKenna says.