However, combined cohort of young investors comes last in assets
In a recent survey released by Cerulli Associates, millennials and Generation Z had the largest increase in overall financial worth in 2021, going from US$2.9 trillion to US$3.6 trillion.
Although they are the lowest generational cohort regarding assets, millennials and Gen Z together make up the second-largest generational demographic.
But in terms of increasing their wealth, they've done just as well—if not better—than their more elderly counterparts. While Gen Z is experimenting with investing on brokerage sites, millennials are actively saving for retirement.
Read more: How to profit from millennials as the biggest, soon wealthiest, demographic
According to Cerulli, younger investors are ready for comprehensive financial advice and are willing to pay for it as they advance in their early investment careers. Although they desire more from their relationship with the financial advisor, they are unsure of exactly what that is.
Scott Smith, Cerulli’s director of advice relationships, said, “Rather than strategically choosing from a logical menu of potential services from each provider, investors more often end up selecting providers on a just-in-time basis, resulting in ad hoc collection of relationships, each of which falls short of delivering comprehensive financial advice engagement.”
To avoid this trap, service providers must try to foresee each client's changing needs. These investors will probably reach a point of increased financial complexity as they amass more wealth and must deal with additional obstacles like home ownership or college savings.
“To retain these investors long-term, providers will need to provide timely input on these crucial subjects or face expected attrition as consumers seek more holistic wealth management advice,” Smith said.
Read more: Why are millennial inheritors quitting their wealth managers?
Financial service companies are increasingly concentrating on bringing services that were previously only available to the wealthy to mass-market households as they compete with one another.
This is accomplished either using technology to scale up services like direct indexing or by the mergers and acquisitions of retail brokerages or robo-advisors to build a channel for self-directed investors to receive more formal advice from the acquiring company.
According to the survey, service providers who have long catered to baby boomers and Gen X households should concentrate on building lasting connections with younger households as these households get older and their finances get more complicated.
“While services are crucial, particularly as larger asset managers acquire smaller outfits to build out their capabilities, attention on the client-facing side, particularly on growing market share and mindshare among millennials and Generation Z, can’t be ignored,” Smith said.
