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Advisors - May 2, 2018

Millennials Don’t Use Advisors – 3 Ways You Can Change That

So I’m a millennial — born in the ’90s, raised on Pop Rocks and the internet, living off quinoa and hummus — millennial. But when my millennial friends and I aren’t eating overpriced brunch or over-editing Instagram photos, we actually have more intellectual conversations than you might think. Things like cryptocurrencies and Robinhood have added a new excitement to investing that draws us whippersnappers in. We compare portfolios, talk about upcoming IPOs, and idolize both Warren Buffett and Evan Spiegel (SNAP) alike.

Whether you’re an apologist or a detractor, you have to acknowledge that millennials drive — and often demand — innovation in the financial sector (and every other aspect of our lives).

So what can you, my friendly neighborhood RIA, do to secure my business? I’ve done my best to boil it down to three important factors:

1. Information — Lots of It

Quarterly updates? Not enough. Monthly? Getting warmer.

In my ideal world, my advisor would give me daily, or at least weekly, market and performance updates. I want to know about leading indicators and what they could spell for my financial wellbeing. Even better, I want to hear how this regulation, or that trade deal, or these debt ratings, will impact my current positions — all in nearly real time.

Remember that millennials pride themselves on being individuals. We don’t want to feel like we’re just one of the hundreds of accounts you manage. Communication puts us at ease.

Meeting The Ask: This ask isn’t so much about information as it is about accessibility and ease of use. You need to use data and insights to tell digestible stories — and a scalable way to succinctly tell those stories. In this respect, it’s always good to be proactive — consider a weekly email or blog post to keep your clients up to date. Including visuals makes information even easier to understand. An example below shows the Financial Select Sector SPDR ETF (XLF) against economic indicators. This chart tells a simple story — that rising interest rates will benefit lenders — in a highly intuitive way.

2. Responsiveness

Even two-day shipping feels slow these days.

If I see Michelle Caruso-Cabrera talking about proposed steel tariffs at 12:30 p.m., I would like to know that this is just a pothole in the road or that action is being taken to ensure my investments can weather the storm. Maybe there’s even a chance to take advantage of the volatility before the market closes. For better or worse, millennials seek instant gratification in everything we do.

There is an invaluable peace of mind that comes with knowing my advisor is agile and my investments are well-positioned.Meeting The Ask: With this one, your goal is to calm the client’s nerves. Most millennials, or any younger investors, have relatively long investment horizons. As with any client, millennials’ trust is earned, not just given. So if a client reaches out about a recent dip in the market, don’t fall into the trap of saying, “trust me, I’ve seen this before,” — show them! As an example, take a look at the chart below. Apple’s (AAPL) total return price changed by -3.01% from January 2015 to January 2016. If your client had panicked and sold at that point, they would have missed out on 9.09% returns through January 2017, and 61.96% returns through January 2018!

3. Control

What’s the one thing millennials love more than poké bowls? Validation.

I’ve made great trades and I’ve made awful trades, but each one brought both a lesson and the satisfaction of knowing that I did it myself. We all know that, as a millennial, my net worth is relatively low, and my risk appetite is relatively high, but I think this imbalance should be leveraged. If my advisor said, “I know you’ve been asking about biomedical stocks, here’s $500 we can take some risks with,” my eyes would light up. I would feel like Nick Foles in the Super Bowl, and you can bet I’m calling for the “Philly Special”.

Millennials are not only accustomed to self-service — we relish it. Considering there is a lot of investing runway ahead of me, I’d like to make a bold move here and there. As the Oracle of Omaha said, “I would much rather earn a lumpy 15% over time than a smooth 12%.”

Meeting The Ask: This ask is probably the hardest to tackle. The last thing you want is an angry client saying, “Aren’t you an expert? You never should have let me buy Bitcoin!” A solution would be offering your clients a menu of sorts. You could narrow down a list of stocks based on metrics you trust — EPS, revenue growth, what have you — making sure that, while these stocks might not be in your normal client portfolios, there’s fundamental support. Then, let your clients pick from the menu — they will feel good about taking some control and you can sleep well knowing their picks are fundamentally sound.

I can appreciate that some of these things are easier said than done. But as millennials’ financial savvy and disposable income rise, so will their demand for investment services. RIAs that can match their offerings to millennials’ desires can expedite that process and win business.

YCharts can help you meet millennials’ asks — and those of all your other clients. If you are interested in learning more about the tools used to create the visuals above, sign up for a free trial of YCharts.

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