Wealthy millennial investors see the world and their finances in a much different light than previous generations and over a quarter of them have never considered using a financial advisor, a Spectrem report said.

Wealthy millennial investors see the world and their finances in a much different light than previous generations and over a quarter of them have never considered using a financial advisor, a report by Spectrem said.

Only 4 per cent of wealthy millennial investors - defined by the firm as individuals age 32 and under with over $1 million in net worth - consider themselves to be “advisor-dependent,” compared to 10 per cent of Baby Boomer respondents (those aged 48-66).

The findings reflect insights from an Accenture report earlier this year, which said that millennial investors are more conservative and less trusting of financial advisors than Baby Boom and “Gen X” (aged 33-47) investors. They’re also more inclined to consult other sources before accepting financial advice, it added.

“This poses a fundamental challenge for financial advisors who will see the greatest transfer of wealth in history from Boomers to their heirs over the next several decades,” said Alex Pigliucci, global managing director of Accenture Wealth and Asset Management Services.

On the other hand, it could be interpreted as a largely untapped market which financial advisors should target, Spectrem noted.

“Add in the fact that approximately 19 per cent of a millennial investor’s portfolio is kept in deposit accounts, and you have a great potential for building a long-lasting relationship with the millennial investor,” the firm said.

But it is also worth noting that millennials “enjoy investing more than the other generations and do not want to give it up,” the report - entitled High Net Worth Millennials - found. They’re also more buoyant about their future, with some 70 per cent believing that their personal financial situation will be stronger a year from now.

Even so, they’re still “fairly conservative” - less than half are willing to take significant risk on their investments for bigger returns, for example. Likewise, they plan to invest more of their assets in cash than their slightly older counterparts.

“This goes against typical investment policy that believes that the younger investors have more time to see their money grow and, therefore, should invest a little more aggressively than their older counterparts,” Spectrem said.

As Michael Liersch, director of behavioral finance at Merrill Lynch Wealth Management previously told Family Wealth Report: “I think the biggest opportunity based on what we’re seeing from the data is that younger investors want to be seen as individuals and they want advisors and wealth managers to come to them with a structured way of helping them articulate what they want out of the investment process and what they need to do to achieve that,” (view article here).

Personal concerns

Somewhat predictably, Spectrem’s report also found that millennial investors are more concerned about being socially responsible when investing than the Boomers. Likewise, they demonstrated a higher level of concern (45 per cent) about using their wealth to help others (versus 31 per cent).

“This in part has to do with millennial investors growing up in a time when social responsibility in general is instilled into them from the beginning,” Spectrem said.

Other previous research has also suggested that this cohort of investors place a much greater emphasis on ensuring that their investment processes are meaningful and reflect what matters to them. And in line with Spectrem's finding that they’re also “significantly” more likely to use social media than other investors is the idea that their biggest reasons for changing advisors include not being provided with good ideas and advice, and not returning emails/calls in a timely manner.

As BofA highlighted in its April report, every generation has unique characteristics “born of its historical moments,” so there are bound to be disparities between this generation and its predecessors.  

But importantly, there is a “huge opportunity” to connect with millennial investors in a way that allows them to work both with an advisor and autonomously, Liersch said earlier this year.

Spectrem’s report is based primarily on research with HNW households across the US. Each quarter, the firm conducts online interviews with some 1,500 mass affluent households, 1,000 millionaire households and 500 ultra high net worth households.