Millennials aren’t facing financial education issues that are profoundly different from what their parents faced, according to Veena Khanna, director for Key Private Bank Strategy.
“As they’re maturing, they want to learn the same things that you and I and others needed to learn as we matured out of high school and then into college and got our first jobs,” she said. Budgeting, cash flow management and credit management are just as important for millennials as they were for boomers and Gen X, she noted.
What millennials do with that education and how they interact with financial professionals, however, will distinguish them from their older counterparts, Khanna said. Millennials “have a different value system” from older investors, which will “drive whether or not financial advisors or wealth management firms will be able to attract and retain the millennial population.”
Millennials’ view of wealth accumulation is different from their parents’, Khanna said. “They are a generation of givers. They’re incredibly concerned about the communities they live in. They’re do-gooders […], and some of that will play into how they think about their own wealth management.”
Khanna said millennials’ impact approach to investing will also play into how wealth managers think about “what sorts of products that we go to market with, given that [millennials] have a different value system.”
Millennials also have different expectations around privacy, Khanna said. They’re more open on social media, and are more influenced by groupthink, she said, which “will force us as wealth managers to think about training and coaching them in a different way.” She believes millennial clients will “gain more from their peers in a groupthink environment. The use of social media will become incredibly prevalent for them as we move forward.”
In high-net-worth families, adult children are more likely to be driving money conversations than their parents, a survey by Key Private Bank found.
Almost three-quarters of advisors surveyed said their clients weren’t consistent in having discussions with their children about money. Two-thirds said their clients weren’t actively engaging their children and weren’t transparent when it came to financial issues.
Millennials’ reliance on their peers and general tech savviness will probably drive advisors’ engagement efforts toward social media, Khanna suggested, and “pushing out content to them as an affinity group and allowing them all to consume it together and opine on it in an open forum.”
One of the drawbacks to advisors of millennials’ reliance on peers is that few advisors are actually part of their peer group. “As unfair as it may be, this particular generation pays more credence to younger advisors,” she said. “This is primarily due to technology credentials; if the advisor can’t talk technology then they may be at a disadvantage.”
In addition to building up their tech expertise, firms should bring in some younger advisors “to tag team and to learn and to start dealing with the younger clients,” Khanna suggested.
Bringing Millennials Into Legacy Planning
A survey released in February by Key Private Bank found that half of advisors have seen their clients become more transparent about finances with their families. However, almost three-quarters said their clients are inconsistent in those discussions, and 67% need to be more actively engaged. Over a third of respondents said their clients’ adult children were more proactive than the parents about initiating family finance discussions.
“As we’ve been dealing with the older generation, we know what their thoughts are around educating the next generation. We also occasionally have the opportunity to talk to that next generation that will be the inheritors of wealth and we know what they’re thinking. Both of them need to connect; the parents generally are thinking the next generation is going to squander the funds, and they’re not ready to disclose and they’re not ready to be transparent with them.”
However, she continued, “what the millennials are telling us is that they have a need to know; they have a need to be educated, just like past generations were, on how to be responsible stewards of that money.”
Millennials “are very appreciative of what the prior generations have done; they want a formal opportunity to thank that generation.”
Key Private Bank’s family wealth practice launched a legacy planning service about a year ago, Khanna said. The bank dedicates a day to legacy planning, Khanna said. “We talk to the family ahead of time. We plan out an agenda,” and when the family leaves, “they’re in a better state. The parents are in a better state of mind because they realize this generation isn’t going to just squander the funds, they just have a different value system that will lend them to utilize the funds in a different way.”
The millennials in the family “are thankful that we brought them together because they get a say-so” in how family money is spent, she said.