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Simple math confirms the importance of millennials and Gen Z to the future of the advisory business. While lifespans have increased, the reality is and not to sound ominous, but no one lives forever.
That fact of life is a message to advisors whose client bases are currently heavily comprised of baby boomers and that’s the vast majority of advisors out there. The industry’s embrace of boomers is sensible because they are the wealthiest generation on record and who doesn’t want well-heeled clients? However, there are compelling reasons for advisors to ensure they’re making strides with millennials and Gen Z.
Even when ignoring the fact that the youngest Gen Zers are 16, meaning they don’t need advisors yet, it cannot be ignored that 16 to to 43 year-olds – the age range of millennials and Gen Z – account for 40% of the U.S. population. Factor in those groups’ (along with Gen X) leverage to the great wealth transfer and it’s clear advisors need to acknowledge these demographics and devise strategies that convert younger prospects into clients.
A big part in accomplishing that objective is understanding how young people look at money and why they hold certain views. Valuable insight follows.
Similarities and Differences
In what’s likely a relief to advisors, particularly those that are boomers or older Gen Xers, some financial views held by Gen Z and millennials aren’t too different from their older counterparts. Younger folks value milestones such as home ownership and accumulating savings to fund education for their children, among other important points.
“In general, our work suggests that both Millennials and Gen Z’s financial goals, banking preferences, and medium-term aspirations are not much different from the priorities of previous generations,” notes James Faucette, Morgan Stanley’s Head of US Fintech and Payments. “Young consumers still believe family is the most important aspect in life, similar to what we found in our 2018 survey.”
Something for advisors to be aware. The Morgan Stanley study indicates millennials and Gen Z aren’t against accessing credit, but in what could be a positive sign regarding the long-term financial trajectory of these demographics, they are placing on emphasis on not amassing too much burdensome debt.
“The vast majority of Gen Z consumers have one or more traditional credit cards – at a similar rate to Gen X and Millennials,” adds Faucette.” Although traditional credit card usage is higher among Millennials and Gen Z than it was in 2018, data suggests this is driven by convenience, not financing needs. Younger people’s borrowing is primarily related to auto and home loans from traditional lenders rather than fintechs.”
Debt aversion jibes with data confirming millennials are diligent, devoted retirement savers – something else for advisors to like.
Another Interesting Finding
While Gen Z and millennials are highly tech-proficient, they also like some forms of traditional finance, including, believe it or not, brick-and-mortar bank branches.
“Another unexpected finding is that while Gen Y and Z are more drawn to online banking than their predecessors, about 75 per cent acknowledge the importance of physical branch locations – and still prefer to bank with their traditional national, regional, and community banks over online-only providers. What’s more, they also believe physical bank branches will be important long-term,” concludes Faucette.
It may be a stretch, but perhaps that could signal younger clients and prospects want access to some of the same financial services as their parents, including advisors.
Related: Generational Wealth: How Black and Latina Women Are Leading the Charge