Conventional wisdom paints a vivid picture of millennials and their attitudes on investing.
To explore these assumptions, a 2018 online survey of 2,828 millennials, Gen Xers and baby boomers and a series of eight consumer focus groups were analysed. The full report can be accessed here: Uncertain Futures: 7 Myths about Millennials and Investing, Full Report.
Millennials are defined as those born between 1981 and 1996 (ages 22 to 37 at the time of the survey). Gen X are those born between 1965 and 1980 (ages 38 to 53 at the time of the survey). Baby boomers are those born between 1946 and 1964 (ages 54 to 72 at the time of the survey).
Here are some misconceptions.
Millennials have lofty goals.
A common assumption is that millennial financial goals are in terms of the “FIRE” type (Financial Independence, Retire Early).
Contrary to this generalization, among those who expect to retire at all, millennial investors and non-investors expect to retire at age 65. Just 3% of millennials with taxable accounts plan to retire before age 50.
Notably, millennial non-investors are more likely than investors to say they will never retire because they cannot afford to (17% non-investing millennials, 10% millennials with retirement accounts only, 8% millennials with taxable accounts).
When it comes to the key barriers to investing, they cite debt and income (which translates into insufficient savings) as major hurdles to overcome. Not surprising.
However, a lack of knowledge is also cited as an obstacle.
Millennials are overconfident in general, and about their financial lives. But wary of the financial services industry.
The millennial stereotype suggests they are generally overconfident, and according to prevailing wisdom, this spills over into their view of their own investment decision-making ability.
Contrary to this view, this study found that millennials, regardless of segment, feel there is still a lot to learn when it comes to investing.
Millennials are often described as wary of the financial services industry and by extension skeptical of financial professionals. In this study, 41% of millennials work with a financial professional. Most millennial investors are satisfied with their current financial professionals.
In addition, millennials who are not currently using, or not likely to use, a financial professional rarely cite lack of trust as a reason for not using one. Instead, they mainly point to the perceived expense of working with a financial professional and their insufficient funds.
Millennials want a financial professional who is more of a teacher than a friend. To build trust, millennials say they want a financial professional who will educate them, who will customize their approach to the client’s needs and who can demonstrate that they place the client’s interest above their own.
A common assumption is that millennials overestimate the investable assets needed to work with a financial professional, which becomes a barrier to seeking out one. In contrast, the study shows that millennials underestimate the investable assets needed to work with a typical financial professional.
Being digital natives, millennials naturally gravitate toward robo-advisors.
Because they have grown up in the digital age, we often assume that millennials would find the concept of robo-advisors appealing. In contrast, we see that millennials currently have limited awareness (and use) of robo-advisors. In addition, interest in robo-advisors is limited among millennials.
Millennials also have relatively low familiarity with socially responsible investments and investment crowdfunding. Familiarity with cryptocurrencies is somewhat higher (comparatively).
In the survey, these explanations were provided:
- Socially Responsible Investing: an investment strategy that seeks to combine financial return and social/ environmental good. Sometimes called values-based investing or ethical investing.
- Investment Crowdfunding: a way for a company to ask a large number of backers to each invest a relatively small amount. In return, backers receive equity shares of the company.
- Cryptocurrency: a digital or virtual currency that uses cryptography for security (for example, Bitcoin).
Millennials as a group are homogenous.
Millennials are generally thought of as a homogenous group, with similar attitudes and behaviours across demographic sub-groups. And so it is assumed that they likely have similar investing attitudes and behaviours. Not so.
The study found notable differences in three other millennial subgroups: rural/urban; male/ female; and trailing (ages 22-29)/leading (above 30).
Female millennials are less confident in their decision making about investing, more likely to say that having greater knowledge would prompt them to invest.
There are also some differences by race and ethnicity.
