Ninety-two million strong, millennials have become a force to be reckoned with. As the baby boomers phase out, RIAs need to make serious strides in understanding this up-and-coming group. The good news is that the opportunities are endless, especially considering that this cohort has surpassed the baby boomers by 15 million and now represents America’s largest living generation.
For this reason, the millennial imperative can no longer be ignored. If RIAs want to build and ensure sustainable businesses, they need to make it a point to understand this Facebook-updating, Periscope-ing generation that now makes up approximately 25 percent of the U.S. population. How could a business survive if they ignored a quarter of their customers?
So, RIAs, how well do you know your next big client? Read on to find out, as we dissect five common millennial myths.
1) Millennials are not benefiting from their college degrees.
Did you know that college-educated millennials are making higher salaries than the general population? Or that over 60 percent of millennials are making more than $50,000 a year compared to 50 percent nationally? To boot, most millennials have even established a retirement plan with their employer. Sure, the alums in Generation Y were off to a rocky start post-recession, but they’ve come a long way since then. There are only brighter days ahead, too, as more than one-third of employers plan on hiring even more new graduates this fall.
2) Millennials spend more money on luxuries and do not care about saving.
Millennials carry a stigma of frivolous spending, whether it’s for new cars, designer clothing or other luxury items. However, in reality, the majority of millennials are practicing prudent saving habits and putting off large commitments such as marriage and car payments to save for their future. RIAs need to accommodate this shift in demographics to understand millennial spending habits and advise them on ways to best meet their savings goals.
3) Millennials are less likely to invest in stocks and bonds.
RIAs may be thinking, “Why bother trying to land millennials as clients if they’re not investing in what I’m offering?” Despite popular belief, millennials are very interested in expanding their portfolios. In fact, nearly two-fifths of millennials currently have investments in stocks, bonds and mutual funds, which is more than the average number of Americans who have these same investments. In addition to investing more, millennials are also diversifying their portfolios more than older generations with equities that they are passionate about.
4) Millennials buy more spontaneously without doing as much background research.
Millennials have received a bad reputation of making arbitrary spending decisions without knowing if their purchases are smart investments. However, fifty-seven percent of millennials compare prices thoroughly for in-store purchases, whereas older generations are much more likely to take prices at face value.Millennials also price check experiences, using peer review sites, social media and blogs to ensure that they’re getting the best bang for their buck. If RIAs want to make inroads with this market, they need to offer a competitive advantage and make it well known. If not, millennials will move on to the next advisor in the queue, all at the touch of a button.
5) Salary is the most important appeal of a job for Millennials.
Though they are often referred to as the cash-strapped generation, salary is surprisingly not the most important appeal of a job for millennials. In fact, millennials have placed opportunities for career progression as the number one factor dictating employer attractiveness. Professional development and flexible working arrangements also rank high on the list, surpassing cash bonuses as the benefits millennials value most from an employer. To connect with this generation, RIAs need to better understand millennial values and working preferences and put programs in place to accommodate them.
Editor’s Note: This post is a collaboration between Leah and another member of the Gregory FCA team, Rachelle Gaynor.