Regaining the Trust of Millennial Investors

Climbers helping each other

Millennials are financial veterans, but they don’t even know it. After witnessing the dot-com frenzy and subsequent crash, the 2008 subprime mortgage meltdown, and the 2009 bull market, America’s largest generation is naturally skeptical of the boom-bust version of markets they have grown up on. While they have indeed seen a lot, what many haven’t seen is where financial advisers can help them.

A significant barrier facing advisers is trust, which has been crippled by the volatile markets millennials have witnessed. Aaron Hatch, a certified financial planner and co-founder of Woven Capital, said, “It’s understandable that millennials don’t trust financial planners because frankly, they haven’t served them well.” Brent Vandermeer, portfolio manager and executive director in the private equity group HollisWealth, said, “In general, they don’t trust the people in our industry.”

This mistrust of both the markets and the industry has led millennials to drastic actions. Patrick O’Shaughnessy, CFA, portfolio manager, and author of Millennial Money, called millennials’ low investment rates “very paranoid, risk sensitive behavior.” The newest generation of investors is similar to The Silent Generation during the Great Depression. They hesitate to part with every dollar they get. Before advisers even start talking about details, they have to find a way to regain the trust of the millennial.

One very effective way to build trust is by providing education. For those who are just starting out, providing basic education about the markets, its cyclical nature and investing can help immensely. Unfortunately, a lot of investor education is more about advertising than a genuine attempt to help the young investor. In a 2011 U.S. Government Accountability Office report to the House of Representatives, the GAO said, “Although investment education is defined as generalized investment information, providers may highlight their own funds as examples of investments available within asset classes even though they may have a financial interest in the funds.” This approach can send millennials running to the exits.

Per John Bonini of Impact Branding & Design LLC, millennials are ” adverse to sales pitches. Rather than being sold to, they prefer doing the research on their own in order to make decisions.”

Clearly, a new approach needs to be taken with these younger investors. Build trust by providing true education—not thinly veiled sales materials. While providing effective education can be a challenge there are significant benefits to this strategy.   An educated consumer is the best type of client.They understand the risks of the market and have reasonable expectations. They invest regularly knowing the power of compounding, and they understand that no one can accurately predict the future of the markets.  They are less likely to blame advisers for things out of their control, and more likely to understand the benefits of their services.

However, the education has to be different. Studies show that today’s educational materials are often perceived as dry, dull, and boring. Also, millennials may need more of a background than prior generations due to a lack of financial education in schools and families. TIAA-CREF Director Amy Podzius said. “Advisers need to help them understand the basic tools of planning before they can actually ask them to engage in a plan of their own.”

Filling the education gap won’t be easy, but it’s a big step in the right direction. Some advisers find that financial conversation with millennials is like pulling teeth. One study found that one in four people have moderate to severe anxiety when meeting with a financial adviser. After all, money is more than just numbers. It reveals people’s priorities, strengths, and weaknesses. Also, most of us do not like looking uninformed. So rather than inundating clients with financial details and jargon, advisers need to understand the stresses associated with revealing financial realities to a stranger.  Build a connection first, then get to work later.

Being approachable, low key, and sharing your own past learning curve with money can go a long way in helping to build rapport.

Once millennials know you’ve been in their shoes and you’re on their side, they will let you help them where it matters most. As their financial “personal trainer,” they can rely on you as they step back into investing and get on track to achieving their goals.


Jeanne Klimowski is founder of Wavelength Financial Content Inc., a firm that provides marketing and educational content to financial advisors.  Contact us to find out if we can help your firm make the most of your online presence.



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