Millennials want financial advice, not trophies

The Natixis IM study challenges five financial stereotypes of individual investors between the ages of 25 and 40.

Natixis Investment Managers (Natixis IM) today published the report “Financial Truths about Millennials in 40 Years”. When the first millennials reach the age of 40, they also enter their peak earnings. This report outlines five facts about millennials and their financial habits, dispelling stereotypes that this generation is frivolous and unplanned.

A global survey of nearly 2,500 individual investors between the ages of 25 and 40 with minimum assets of $ 100,000 revealed the following:

  • 59% of millennials have a professional financial advisor – a higher percentage than Generation X (56%) or baby boomers (48%).
  • Financial planning is the professional advice they are most interested in, perhaps to help them achieve what 82% of Millennials see as clear financial goals, including retirement at age 60.
  • They are serious savers, saving an average of 17% of their retirement income.
  • So far, they have amassed considerable wealth, with 31% attributing the origin of business or self-employment income and 37% to investment. Only 17% cite inheritance or family money as the source of their wealth.

“Millennials’ reputation is dying. Some argue that they are irresponsible and prefer frivolous spending over savings. But Millennials not only have high expectations, but they are also active when it comes to financial planning, and are no longer as carefree young people as we think. said Dave Goodsell, executive director of the Natixis Investor Center for Investors.

He adds: “This generation has enjoyed a long bull market with low interest rates and low inflation for most of their adult lives. They also survived the September 11, 2001 attacks, bursting the first technology bubble and a severe financial crisis that hit their parents’ generation hard. They know what bankruptcy looks like and want to protect their interests as risks increase and their finances become more difficult. The good news is that Millennials not only recognizes the value of planning services, but also trusts financial advisors. ”

“This Millennials poll challenges many of the financial stereotypes of this generation. In this regard, they still prefer human relations in the management of their assets and are very demanding of their financial partner. As such, Millennials are very sensitive to ESG investments and expect commitment from their asset managers. These are undoubtedly structuring trends for the asset management market, and which managers need to be aware of, as the older generation is approaching 40 years old. commented Sophie Courmont, Managing Director and responsible for French-speaking Switzerland, Monaco and Israel at Natixis IM.

The results of the Natixis IM study show five facts about millennials at age 40:

1. Algorithms are not omniscient

It’s easy to believe that Millennials manage all their finances from their phones, especially since many of them use mobile banking applications. However, the digital wave has not grown into a desire for automated investment advice, as Millennials are more likely to trust people than digital solutions. Of those who have a professional advisor, 88% of respondents trust them to make decisions, while less than half (48%) trust the algorithms that guide the work of the board. Only about a quarter (24%) trust social networks to perform this function.

Six out of ten millennials (59%) receive advice from a financial advisor, or 40% excluding 19% from virtual advisors. Only 7% rely solely on work advice.

The large number of millennials seeking professional advice may be the result of greater financial complexity, hence the need for personalized advice. Older millennials marry, buy homes, and start families with a variety of sources of income. Half of the respondents claim to have several sources of income: employment (78%), business ownership / self-employment (31%), investment (37%) and allowance / inheritance (17%).

Millennials want direct help in managing their assets, not relying on an algorithm. Four out of ten say that helping to manage volatility (40%) is an important part of their consulting relationship. Many also say it is important that their investments are in line with their values, and 37% want their adviser to help them solve their tax problems.

2. Measure the risk and the rate

This generation has enjoyed a long bull market with low interest rates and low inflation for most of their adult lives, and two-thirds (66%) say they are willing to take risks to improve profits. However, they are much more at risk than they seem: 72% say they prefer investment security over efficiency.

The volatility of the COVID-19 pandemic and rising geopolitical tensions leading to inflation and rising interest rates have shown that Millennials focus more on risk management (48%) than on the fund’s ability to outperform benchmarks when choosing investments. %). 60% of Millennials say market volatility affects their ability to achieve their savings and retirement goals, and four out of ten say the most important part of a relationship with their financial advisor is helping them manage volatility.

“Although be careful, many millennials are torn between risk and profit expectations. Expectations are currently 16.3% higher than inflation, in part because profits over the past three years are two to three times higher than the average annual return of 8.19% that S&P achieved over 20 years between 2000 and 2020, which raised expectations. Commented Dave Goodsell. He adds: “However, the market is more volatile, so investors need to plan and assess their risk appetite accordingly.”

3. Pragmatic millennials

Millennials see wealth as a tool to serve their ideals. 78% of them believe that investing is a way to positively influence the world, and 63% even believe that they are obliged to invest to solve social problems. Thus, after risk, the second most important factor for millennials when choosing an investment is whether the investment is in line with their values, but they also want to make a profit by striving for change in society.

Some examples of Millennials pragmatism in the ESG are relevant:

  • Millennials know that investing alone is not enough. 77% of those who invest in ESG say that their fund manager should actively cooperate with the companies in which they invest, and 72% expect that the fund manager will vote for every share they have.
  • 57% understand that index funds contain companies that may not reflect their personal values.
  • 52% ask their financial advisor to suggest ESG factors for inclusion in the investment analysis along with broader financial factors.
  • Although 63% of Millennials feel personal responsibility for the great challenges of our century, they also believe that responsibility should be shared between companies (80%) and governments (75%).

4. Up to 40 years is not so far away

Millennials expect to retire in 60 years on average. “At 40, you can look at things. Retirement at 60 is an ambitious goal, and they are aware of the risks, which may explain the importance they attach to planning and advice, ”commented Dave Goodsell.

  • Millennials are determined to save. On average, they set aside 17% of their annual retirement income, with 76% believing that they are increasingly obliged to finance their own retirement.
  • However, as inflation has reached a 40-year high over the past two years, 72% of millennials see this as one of the biggest risks to their pensions.
  • 72% fear that an increase in public debt in their country will lead to a reduction in public pensions in the future.
  • Although 70% of Millennials believe they can retire with financial security, their goal is fast approaching, and 66% say they agree to work longer than expected.

5. The pandemic reminded us of the fundamental principles of finance

COVID-19 has led to 58% of millennials experiencing financial insecurity. 28% of respondents said they or their households lost income during the pandemic, and more than a fifth (22%) said that their financial security was severely compromised. However, during the pandemic, almost a quarter of millennials (24%) increased their trading activities through a financial advisor, possibly increasing the value of professional advice when markets are volatile. 68% said they feel financially secure, perhaps because millennials are convinced they have a financial plan.

Their three biggest current financial fears are high, unexpected costs, job security and taxes. However, looking back, they say the pandemic reminded them of the financial fundamentals, including the importance of controlling spending (46%), having an emergency savings account (38%) and avoiding emotions when making investment decisions (32%).