Did you know that Canadian Millennials, alongside sections of Gen X and Gen Z, will collectively inherit about $150 billion before 2026? In the United States, that figure is closer to a staggering $68 trillion by 2030. This ‘Great Wealth Transfer‘ is the forthcoming passing of wealth from the Baby Boomer generation to their children and grandchildren. In turn, the financial services industry as a whole must be prepared to serve the needs of the unique Millennial generation and their investing style.

Millennials, Money, and the Investment Industry

Who are Millennials?

According to Pew Research, the Millennial Generation was born between 1981-1996 — representing over 25% of the Canadian population. Looking at these dates, you can see that Millennials are a unique generation. They have experienced an analogue childhood, followed swiftly by digital adulthood at the dawn of the Facebook age.

With the eldest of this highly-educated cohort just entering their 40s, Millennials have experienced what can only be described as an economic rollercoaster. A profound global event (9/11) was followed by the 2008 financial crisis, just as many Millennials were starting their careers. Now, looking at Canada specifically, a red-hot real estate market has prevented many from buying a home, even if they are in their prime earning years.

Like many generations, Millennials have had to deal with plenty of (unfair) stereotypes or perceptions. These include labels like “entitled” and “lazy.” This generation is commonly perceived as overconfident and ambitious with their financial and investing goals, including expectations of early retirement. For the most part, studies have dispelled most of these. This cohort is a reasonable group with a growing interest in areas outside of traditional finance.

Millennials and money

When it comes to their finances, Millennials have pretty modest goals. For starters, not living paycheck to paycheck and building some degree of retirement savings. (That said, if they’re even able to retire at all.) These financial goals coincide with the fact that non-investing Millennials typically see income and debt as barriers.

A lack of knowledge is another overlooked detractor. A 2018 study conducted by the FINRA Investor Education Foundation and CFA Institute found that less than 50% of this generation feel confident in their investment decision-making abilities. Both investing and non-investing millennials agree there is a lot about investing they don’t know, further disproving notions of their overconfidence.

Having grown up in the digital era, Millennials naturally see technology as a basic requirement for financial services. The demand for mobile applications and platforms that incorporate social media is greater among this generation. After all, Millennials primarily rely on the internet for investment research and assistance in financial recommendations. True, robo-advisors offer an efficient and cost-effective investment solution. That said, less than 20% of millennials have expressed interest in this service, according to the above FINRA study. That said, Millennials still perceive human interaction as valuable. They recognize that algorithms behind robo-advice cannot account for the complexities and emotions associated with significant life events.

How do Millennials invest?

A recent survey from The Motley Fool found that both Millennial and Gen Z investors favour a mix of traditional and newer asset classes, stock types, and sectors. Recent media attention on SPACs, IPOs, and meme stocks was met with relative indifference, with most young investors unlikely to hold those types of stocks. Other survey findings include:

  • 73% of Gen Z investors, 66% of millennial investors, and 67% of investors aged 18 to 40 overall own stocks. 58% of respondents own growth stocks.
  • Millennials see the value of diversification, with 47% of respondents investing in mutual funds, and 23% investing in ETFs
  • According to respondents, historical stability — not social media buzz or influencers — was the most important factor in determining whether to buy a stock.

Looking a little closer at investing, as HeyAdvisor explains, Millennials are actually not as confident in their knowledge as one might think, are not solely into DIY or robo-investing, and are relatively conservative investors.

Given common stereotypes, it might be easy to assume Millennials would be unwilling to work with a wealth manager. Those who don’t use a financial professional, however, cite fees and lack of resources as their main reasons and not distrust. According to the above FINRA report, around 40% of millennials admit that they don’t know the fees charged by financial professionals. Of those who estimated the fees, 75% believed it to be 5% or more of their investable assets.

When it comes to building trust, millennials consider investor education and knowing that their interests come first as top factors. Millennials want their advisors to explain their steps. They want assurance that transactions are done in the client’s best interests, rather than solely as company moneymakers.

Millennials and ESG investing

When it comes to making investment decisions, millennials are largely looking at factors beyond company performance and earnings.

The Responsible Investment Association (RIA) noted that millennials are 65% more likely than Boomers to look at environmental, social, and governance (ESG) factors. When evaluating opportunities and risk, they look at a company’s corporate behaviour and contributions to society. They are also more likely to express interest in investments that aim to tackle certain social and environmental issues.

“Millennials don’t just see money as a store of economic value, they see it as an expression of their ideals—such as inclusion & diversity, social justice and climate change” explains Dr. Brooke Struck, Research Director at The Decision Lab, in a recent press release. “And there’s a real opportunity for financial professionals to better position themselves and adapt their service offerings.”

And it’s women who stand at the forefront of ESG investing. A recent US study by RBC Wealth Management found that:

“Client respondents who identified as women are more than twice as likely as men to say it is extremely important that the companies they invest in integrate ESG factors into their policies and decisions.”

An increasing number of asset managers and service providers are recognizing the importance of socially responsible investing. Many become voluntary signatories to the United Nations-backed Principles of Responsible Investing (UNPRI). We’re proud that our partner companies, Connor, Clark & Lunn Private Capital and Longview Asset Management are signatories.

What do Millennials want from a financial advisors?

Contrary to popular belief, what Millennials want is relatively simple. Simply put, they want to learn. According to a 2017 study done by Accenture, more than 50% of Millennials want to learn more about cash flow management, budgeting, and planning for specific life goals. This generation of investors is looking for educators to fill in the gaps. They want to expand on their current financial and investing knowledge base.

Millennials are also looking for a hybrid approach to financial and investing advice. The goal is to balance the familiarity of digital with the value of a human advisor or manager. As this generation gets older, they’ll do doubt be managing both their own families and ageing parents. Suffice to say, when navigating emotional life events, nuance is necessary. Financial professionals looking to build and maintain relationships with Millennial clients can supplement one-on-one interactions with digital tools and materials — for example, online tutorials.

One thing is for certain: Millennials are a very large cohort. While studies do paint a fascinating picture of this generation, it’s still a very broad look at a wide-ranging demographic. As the aforementioned Great Wealth Transfer progresses, Millennials need personalized financial advice, tailored to their unique needs.

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