Millennials need and want advice

par Susan Yellin | November 25 2015 07:00AM

Many advisors believe that millennials “have no money and ask too many questions,” but 15 years from now they will be the largest demographic group in the country and should not be summarily dismissed as clients, a conference has been told.

“Millennials will represent the biggest opportunity that most of us will have to work with in the coming years in terms of where asset accumulation is going to take place,” said David MacDonald, group vice president, custom & financial research with Environics Research Group.

MacDonald told the Investment Funds Institute of Canada (IFIC) conference in October that millennials are too big to ignore, not just in terms of their numbers but also in terms of looming wealth transfers. “Their boomer parents have accumulated a lot of real estate wealth and that will be their legacy. They know they are responsible for their finances but they need help defining their goals and establishing plans.”

It’s true that 60% of millennials – those born 1980-1995 – are weighed down by school debt, are underemployed and live longer with their parents than previous cohorts. But he also said they have strong core values, are adaptable, understand technology, are hopeful about their long-term prospects and are more aware of the value of a dollar than Generation Xers.

And they do have a lot of questions, including whether they should rent or buy a home and whether to pay down debt or save, said MacDonald.

“Despite the access to information we all know they’ve got, they do not feel they are more sophisticated investors than other Canadians – this may be a surprise. They ask questions: demanding to know how we came up with fund recommendations and what the asset allocation models are. They must be more sophisticated, aren’t they? They don’t feel that way.”

As they adapt and mature, millennials will be more open to investing assets outside of Canada, they are environmentally concerned and may become more fee-conscious, said MacDonald.

And even though this cohort is strong on the technology front, they do not want to go it alone when it comes to financial services – they want advice. But they want an investor-advisor relationship that is based on mutual trust, respect and open dialogue.

Very conservative

And MacDonald said he didn’t think robo-advisors will have a lot of opportunity with this generation. “Everyone is looking at this as one of the most cost-effective delivery vehicles to get low-asset investors into a plan. Has anyone stopped and asked millennials if they want to be robo-advised? I have and they reject it. What they want because of their individualism and their risk aversion at this point in their lives…is to make sure a human has looked at their unique situation.”

Jonathan Durocher, president and CEO of National Bank Investments, also suggested that millennials are very conservative in nature and reports indicate that beating the market is not their No. 1 priority. Rather, said Durocher, they will accept a lower, but guaranteed rate of return and even the return that closely tracks the overall market.

He also said millennials feel there are some important factors when selecting an advisor:

They don’t want their parents’ advisor

Peer recommendation and referrals are key. “What people are saying about you on the web, what your friends think about you as an investment advisor or your fund company, that’s important to them,” said Durocher. “It’s 20% more important to them than to baby boomers.”

They rate modern tools for financial planners high because they want goals

They want advisors who can present them with a holistic view; they want to see the big picture

They want convenience

While many have bemoaned the lack of advisors to replenish the current baby boomer generation of advisors, MacDonald said that’s simply because there weren’t that many Generation Xers around to fill the void. But Durocher said millennials represent a larger demographic group and will discover financial services as a profession. He noted more are starting out on the stock side, rather than with mutual funds and time will tell if they branch out.

Durocher said National Bank is encouraging younger people to work at their bank by “teaming” millennials with experienced members of the work force. Not only do millennials learn from senior advisors, but attracting younger employees also attract younger clientele to the bank.

MacDonald said that while the numbers look good for millennials starting to enter the advisor work force, he said not enough women are thinking about financial advice as a livelihood.