A recent study in the States by the CFA Institute and Finra Investor Education suggests that when it comes to understanding why so many millennials haven’t started investing, the financial industry have it all wrong.

 

Often considered aggressive, knowledgeable and confident when it comes to investing, the research found that the majority of millennials lack confidence in financial decision-making; despite growing up in a digital world, they prefer to work face to face with a financial professional.

Its report, entitled ‘Uncertain Futures: 7 Myths about Millennials and Investing,’ turns common wisdom about millennial investors on its head, which is suggests the industry has much to do to engage a generation that stands to inherit an eye-watering $40 trillion.

‘the majority of millennials lack confidence in financial decision-making’

Finra Foundation President Gerri Walsh said: ‘This study dismisses many of the assumptions that are commonly held about millennials and why many of them are not investing. These findings help us better understand the needs and wants of millennials to further enhance investor education efforts that will engage millennials in the financial markets.’

According to the study there are actually three subsets of millennials—those with no investment accounts, those with only retirement accounts and those with investment accounts (most of this group also owned retirement accounts)—and they have very different goals and habits.

‘a generation that stands to inherit an eye-watering $40 trillion’

‘By providing insights into investment preferences and concerns, this research can help financial professionals engage and better serve the needs of the next generation of investors, ‘said Bjorn Forfang, deputy CEO of the CFA Institute.

 

The study’s findings included:

 

  • When it comes to working with a financial professional, 58 percent of millennials say they prefer to work face to face.
  • Millennials who do invest more often start when they are young, before age 21.
  • Innovations in investment products and services currently hold limited appeal for millennials.
  • 46% of millennials with investment accounts cited parents and family as key factors in their decision to start investing.

 

 

The survey also debunks the following myths about millennials and their investing behaviour:

 

Myth 1: Millennials have lofty financial goals

 

Millennials expect to retire at the age of 65; non-investing millennials have very modest financial goals and are focused on surviving month to month. In contrast, the financial goals of millennials with investment accounts mirror those of Gen Xers and baby boomers, such as ‘saving enough to retire when I want and live comfortably.’

 

Myth 2: Income and debt are the key barriers to investing

 

While income and debt are important, 39% of millennials without investment accounts state that not having enough knowledge about investing is also an important barrier.

 

Myth 3: Millennials are overconfident in general, so they are probably overconfident about investing

 

Far from being overconfident, only 21% of non-investing millennials and millennials with only pension accounts are very or extremely confident about making investment decisions. This figure increases to 47% percent for millennials with investment accounts.

 

Myth 4:  Millennials are sceptical of the financial services industry and by extension, financial professionals.

 

72% of millennials working with a financial professional are very or extremely satisfied with their financial professional; just 15% of millennials not working with a financial professional cite lack of trust as a reason.

 

Myth 5: Millennials overestimate the investable assets needed to work with financial professionals

 

Millennials actually underestimate the investable assets needed to work with a typical financial professional; 20% believe there is no minimum amount needed, and 60% believe a financial professional would work with them if they had $10,000 or less to invest. 42% of millennials do not know what financial professionals charge for their services and when asked to estimate, they guess high: 77% believe financial professionals charge 5% or more of assets under management.

 

Myth 6: Millennials gravitate toward electronic communication and robo advisors

 

58% of millennials prefer to work face to face with a financial professional, on par with baby boomers (60%) and Gen Xers (58%); just 16% showed strong interest in using robo advisors.

 

Myth 7: Millennials are all the same and have similar investing attitudes and behaviours

 

Millennials are not a monolithic entity; e.g. urban millennials are 50% more likely than rural millennials to have an investment account. 33% of male millennials are ‘extremely’ or ‘very’ confident in their financial decision-making, compared to only 23% of female millennials. 28% of white millennials have investment accounts compared with 20% of African-American millennials.

The findings should help interested advisors begin to decode the elusive millennial generation. ‘Investment professionals who take time to demonstrate that client interests are paramount can expect to earn the trust of millennial clients,’ said Forfang.





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