More millennials than baby boomers or GenX have a financial adviser finds major global report

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More millennials than baby boomers or GenX have a financial adviser finds major global report

Almost two thirds (59%) of millennials have a professional financial adviser which is a higher percentage than either Generation X (56%) or baby boomers (48%), as revealed on 4 May in a new survey by Natixis Investment Managers.

The global report ‘Five Financial Truths about Millennials at 40' covered nearly 2,500 individual investors between the ages of 25 and 40, with minimum investable assets of $100,000, across North America, Latin America, Asia, the UK, Europe and Middle East.

It further revealed that financial planning is the professional advice millennials are most interested in, no doubt to help them reach what 82% of millennials say are clear financial goals, including retiring at age 60. 

They are also diligent savers, putting aside 17% of their income for retirement, on average. 

They have accumulated considerable wealth so far, the source of which 31% attribute to business ownership or self-employment income and 37% say comes from investing. 

Just 17% cite receipt of an inheritance or family money as a source of their wealth.

Dave Goodsell, executive director of Natixis' Centre for Investor Insight: "Millennials get a bad rap, often being cited as not being financially responsible by favouring frivolous spending over saving. 

"Millennials have high expectations, but they also are proactive when it comes to financial planning and are no longer the young twenty-somethings they're often thought to be," said Dave Goodsell, Executive Director of Natixis' Centre for Investor Insight. 

"This generation has enjoyed a long bull market with low interest rates and little inflation for much of their adult lives. They also experienced 9/11, the first tech bubble burst and a severe financial crisis that crushed many in their parents' generation.

They've known what loss looks like and want to protect their interests as they see risks rise and their finances grow more complex. The good news is that millennials not only recognise the value of planning advice, but they also trust financial advisers." 

Andrew Benton, head of Northern Europe & MENA at Natixis IM added: "Millennials in Europe are most likely to use a professional financial adviser, which may be the reason that they're more likely to feel financially secure than the global average. 

"It's true that millennials have high expectations for their future finances, but they are taking the time to plan accordingly, which is encouraging especially as we - and they - navigate more volatile markets." 

Natixis IM's research findings reveals five truths about millennials at 40:

1 Algorithms can't answer every financial question

It is easy to assume that millennials manage all of their finances from their phones, especially as so many of them rely on mobile banking apps. However, the digital wave hasn't translated to a desire for automated investment advice as millennials are more likely to place their trust in people than in digital solutions.

Of those who have a professional adviser, 88% of respondents trust them when making decisions, while less than half (48%) of millennials trust the algorithms that are the engines of automated advice and only around one-quarter (24%) trust social media to do the job.  

Six in ten (59%) millennials receive advice from a financial adviser either solely (40%) or in combination with automated advice such as a robo-adviser (19%). Just 7% solely rely on automated advice. 

The high number of millennials using a professional adviser could be a result of more complicated finances leading to a need for personalised advice. The older millennials are getting married, buying houses and starting families coupled with diversity in where wealth is earned. Half of those surveyed say they have multiple sources of wealth ranging from employment (78%), business ownership/self-employment (31%), investments (37%) and allowance/inheritance (17%).  

Millennials want direct help with managing their assets rather than relying on an algorithm. Four in ten say help with navigating volatility (40%) is an important part of their advisory relationship. The same number also say it is important for their investments to match their personal values, while 37% want their adviser to help them with tax issues.

2 Risk is real when there's more on the line

This generation has enjoyed a long bull market with low interest rates and little inflation for much of their adult lives and two-thirds (66%) say they're comfortable taking risk in order to get ahead, yet they are much more risk-averse than they let on with 72% saying they choose investment safety over performance.  

Volatility in response to the Covid-19 pandemic and rising geo-political tensions causing inflation and interest rate hikes means that millennials focus on risk management (48%) when selecting investments, more so than on a fund's ability to beat the benchmarks (26%). 60% of millennials say market volatility undermines their ability to reach their savings and retirement goals, and four in ten say that the most important facet of the relationship with their financial adviser is help with managing volatility. 

"While it's good to have a healthy respect for risk, many millennials are genuinely conflicted between risk and their return expectations. Return expectations are currently running at 16.3% above inflation in part because the returns generated over the past three years run two to three times higher than the 8.19% average annual return the S&P delivered over the 20 years between 2000 and 2020, which has increased expectations," commented Dave Goodsell. "However, there's also more market volatility so investors need to plan accordingly and assess their risk appetite." 

3 Millennials understand they don't have to sell out to be a capitalist

Millennials view wealth as an extension of their values. 78% think of investing as a way to make a positive impact in the world and 63% even believe they have a responsibility to help fix societal issues through their investments. As such, after risk, the second most important consideration millennials make when selecting investments is whether investments match their values, but they also want returns while pursuing societal change.

Their pragmatism to ESG investing extends:
•    Millennials know investing alone is not enough. 77% of those who have ESG investments say their fund manager should actively engage with the companies they invest in and 72% expect the fund manager to vote on all of the shares they own. 
•    57% understand that index funds contain companies that may not reflect their personal values. 
•    52% ask their financial adviser to offer ESG factors to be included in the investment analysis, alongside wider financial factors. 
•    While 63% of millennials feel a personal responsibility to address big issues in the world, they also think the responsibility should be shared by companies (80%) and governments (75%). 

4 Retirement feels a lot closer at 40

Around the world, millennials expect to retire at the age of 60, on average. "Turning 40 can put things in perspective. Retiring at 60 is an ambitious goal, and they are aware of the risks, which may explain the importance they place on planning and advice," Dave Goodsell said.  
•    Millennials are committed to saving. On average, they are putting away 17% of annual income for retirement as 76% agree that it is increasingly their responsibility to fund their retirements on their own. 
•    Though, with inflation reaching a 40-year high in the past two years, 72% of millennials see it as one of the biggest risks to their retirement security.  
•    72% are worried that increasing levels of public debt in their country will result in reduced public retirement benefits in the future. 

While 70% of millennials are confident they can retire with financial security, the goal is fast approaching, and 66% say they accept that they may need to keep working longer than anticipated.
 
5 The pandemic served as a reminder of financial basics

Covid-19 caused 58% of millennials to feel stressed about their financial security. 28% of respondents said they or their household lost income during the pandemic and over a fifth (22%) experienced a significant setback to their financial security.

However, during the pandemic, nearly a quarter of millennials (24%) increased trading activity through their financial adviser, perhaps reinforcing the value of professional advice when markets are volatile. 68% said they felt financially resilient, which could be a result of millennials ensuring their have a financial plan in place. 

Their top three financial fears now are a large, unexpected expense, job security and taxes. However, in retrospect, they say the pandemic served as a reminder of basic financial lessons, including the importance of keeping spending in check (46%), having an emergency savings account (38%) and avoiding emotions in investment decisions (32%). 

Natixis Investment Managers surveyed 2,459 millennials across North America, Latin America, Asia, the UK, Europe and Middle East. Data was gathered in March and April 2021 by the research firm CoreData, with additional analysis conducted in March 2022 by the Natixis Investment Institute.

A full copy of the global report on millennials can be found here. https://im.natixis.com/intl/research/2022-millennial-report