What Wall Street can't figure out about Millennials

By John Spence


The financial-services industry needs to throw out its traditional playbook if it wants to reach Millennials and play a role in helping them realize their investing goals.

The stakes are high for both sides.

Many Millennials are at risk of falling behind on their financial goals because they haven't even started investing yet. For example, about half of Americans between the ages of 18 and 29 have zero retirement savings, according to a Federal Reserve survey. Millennials, also known as Generation Y, are generally defined as those in their 20s or early 30s, and they are justifiably wary of the financial industry and the market.

The chart below is from Statista:


For Wall Street, many financial firms that focus on older, wealthier generations such as Baby Boomers are unprepared from the coming general shift. They will have to reshape their services and message to meet the needs of Millennials. To take just one example, traditional marketing and advertising doesn't really work with many Millennials because they simply shut it out.

In about five years, more than one of three adult Americans will be Millennials, and by 2025 it is projected that this demographic will comprise as much as three-quarters of the workforce, according to the Brookings Institution.


Financial firms and advisers will have to rethink their approach to work with Millennials, who will soon be hitting their peak earning years.

Here are a few ways that Millennials are different from older cohorts:
  • They're extremely conservative as investors: Millennials are the most fiscally conservative generation since the Great Depression, according to a UBS survey. This makes sense because they've seen their parents get hit with two major bear markets the past 15 years. They tend to avoid the stock market and hold a higher percentage of cash than older investors. They've also witnessed the effects of the housing boom and bust.
  • They're very skeptical: The financial crisis has also made them understandably suspicious of Wall Street and potential conflicts of interest. Millennials require a high level of trust before they give their money to a bank or financial adviser. They verify — using information on the Internet, social media and from personal connections.
  • They defy stereotypes: They may be seen as coddled and spoiled, but it turns out they care a lot about their financial futures and don't want to repeat their parents' mistakes. They're tech savvy and highly educated as a group. They want to have control over their finances, so they're more likely to be self-directed investors. They want to be comfortable, but they don't want their lives to be dominated by money, which is often secondary to pursuits such as traveling, family, staying healthy, friends and volunteer work.
  • They have financial challenges: In many ways, it's not easy to be a Millennial. College tuitions have skyrocketed in recent years, and many graduates are saddled with high levels of student debt. The Class of 2014 is the most indebted ever. Rents and home prices are creeping higher while wages have mostly stagnated. Also, more Baby Boomers are staying in the workforce and delaying retirement after the financial crisis, making it harder for younger investors to find jobs. These are all reasons why Millennials are hitting major milestones later in life such as getting married, buying a house and having children.
  • They tune out marketing and advertising: Perhaps more than any other generation, Millennials understand how marketing and advertising work, and they're adept at ignoring it or even finding ways to turn it off completely. They don't click on banner ads or open mass emails.

So, firms that "get it" with Millennials understand their unique habits and concerns. They communicate in language and mediums that resonate with Millennials, and show how their services are different and/or better.