Two young people talk

Engaging the Next Generation of Clients

As baby boomers are nearing retirement, younger generations are entering the workforce in increasing numbers and emerging as a new wave of investors. For Wealth Management Advisors, being able to connect with this growing population of investors is key to serving them and to acquiring new business. Here, we review the investment trends and attitudes behind two of the most influential generations today: Millennials and Gen Zers.

How Do Millennials Approach Investing?  

In short: cautiously. This is the generation that came of age during the Great Recession of 2008, witnessing parents and family members lose homes, jobs and investments.

Watching the markets crash as they entered adulthood shaped this generation into cautious investors. They track their expenses more carefully and are more likely to stick to a budget than baby boomers, according to a study by T. Rowe Price.

Millennials approach their finances and investments in specific ways.

  • They focus on impact investing. Millennials prefer to make investments that do more than just grow their portfolio — they seek to invest in companies that have positive effects in the environmental, social and tech spheres. These can include businesses focused on gender diversity and racial equality, smart-energy companies and institutions that prioritize solar and clean energy.
  • They research their options. One benefit to this generation’s financial trepidation is they perform due diligence when it comes to double-checking all options to determine what’s best. They also closely monitor their financial accounts and tend to be more cognizant of fees.
  • They prioritize saving. Per Bank of America’s 2020 “Millennial Report,” nearly a quarter of millennials who save have $100K or more banked, three-quarters of them are saving for retirement and more than half are building emergency funds.
  • They invest in life experiences. Millennials prefer to spend their money on experiential items — such as travel and dining out — over material possessions.   

What Are the Financial Habits of Gen Z?

Gen Zers (those born between 1996 and 2010) have similar investing perspectives and financial habits as millennials. They, too, focus on impact investing — perhaps more so than millennials — and they also choose to spend their dollars on travel and leisure rather than things. But there are a few distinguishing factors that differentiate Gen Z from millennials.

  • They are proactive about debt management. Gen Z learned from millennials’ experience with the financial struggles that face both generations: the rising costs of education and housing, to name two. Because they believe debt is unavoidable, Gen Z addresses it strategically.       
  • They are pragmatic. This generation takes an intentional financial approach to larger life decisions. For example, when selecting where to attend college, they might opt for public schools or scholarship programs to mitigate financial burdens.   
  • They juggle multiple jobs. More than any other generation, Gen Z is the most willing to take on more than one job to meet their financial goals. They also accept — in fact, they anticipate — that they’ll have many employers in various careers throughout their lifetime.

Do Millennials and Gen Zers Use Financial Advisors?

Yes. Even though these generations are comfortable with technology, using mobile apps for everything from transportation to banking, both millennials and Gen Zers believe their financial challenges to be greater, and more complex, than previous generations. This makes them likely to rely less on fully automated platforms and instead look to hybrid approaches that combine the algorithms of robo advisors with the real-world guidance of a financial advisor. 

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