Broker Check

Breaking the Barriers: Turn Millennials into New Clients

| September 27, 2017

Looking for a way to grow your independent financial services practice? Consider focusing at least a portion of your efforts on the group of people born between 1982 and 2004. There is opportunity in MILLENNIALS, who according to recent research are NOT investing but want advice ABOUT investing. There are 75.4 million reasons for considering this group as potential clients. That’s the number of Millennials in the United States, which IS THE NATION’S LARGEST LIVING GENERATION.

A HARRIS POLL FROM 2016 found that “nearly 4 in 5 Millennials (79 percent) are not currently investing in the stock market, and only 13 percent say the reason is because they are still paying off student debt.” Other surveys found that 70 PERCENT OF MILLENNIALS KEEP THEIR MONEY IN CASH rather than stocks. Trust and fear appear to be the biggest barriers to investing for this group, which grew up with technology like no other generation before. Independent financial advisors can provide comfort to Millennials on both counts.

Biggest Hurdles: Trust and Fear
It turns out according to the Harris survey, and perhaps surprisingly, that young investors do not trust algorithm based trading and money management. About 67 percent surveyed said it is very important for them to decide in which companies or funds to invest their money. That’s a direct shot at the so-called Robo-advisors that have proliferated the marketplace. This fact provides a great opportunity for independent financial advisors to help young investors get into the game. Millennials are looking for someone to trust with their money. Advisors can help these prospective new clients take a holistic look at their financial picture — debts, assets and risk profile for starters – and become a trusted resource for the long term.

Millennials are also afraid they don’t have enough money to begin investing. Some of that is born out of belief that financial advisors require high minimum initial investments and worries about the costs of maintaining investments. Personal debt levels may also be a perceived barrier. These perceptions might be addressed by financial advisors who can educate young investors about compounding, something ALBERT EINSTEIN MAY (OR MAY NOT) have called ‘the greatest invention in human history’. THIS CHART AVAILABLE ONLINE FROM FRANKLIN TEMPLETON shows the benefits of starting an investment early, staying with it over time, and reinvesting the earnings. Compounding can help even a small initial investment grow exponentially.

The adage that past performance doesn’t guarantee future results perhaps goes without saying. However, the chart shows that growth emerged even after the financial crisis of 2008 took its toll. Millennials lived through that and the subsequent Great Recession. But just as fear and crisis have been the norm across human history, market resilience has also been the case over time. As the following chart shows, the stock market has rebounded through the tumults of the past.

Time is an important asset that Millennials, and those even younger, possess which Baby Boomers no longer do. Financial advisors who develop personal relationships with these age groups can help overcome trust and fear barriers so they can take advantage of time. As this item from EDSUGE.COM points out, better information allows for more personal and time-sensitive communication. Financial advisors should make sure to provide the right kind of technology tools, so these new clients can track the progress you help them achieve!