New research dispels myths about millennials' financial attitudes

The view of young people as overconfident, skeptical, and inclined toward robo-advice needs to be revisited

By Leo Almazora

Oct 09, 2018

The Finra Investor Education Foundation has released findings from new research on millennials and investing, which it sponsored in partnership with the CFA Institute.

“This study dismisses many of the assumptions that are commonly held about millennials and why many of them are not investing," said Finra Foundation President Gerri Walsh.

Based on a survey of more than 1,800 millennials in the US, the firm found that millennials have modest financial goals. While goals like starting a business and early retirement have become fairly popular among the younger generation, millennial respondents actually expect to retire at age 65. Those who do not expect were less likely to believe they could retire, while those with investment accounts have slightly higher aspirations like saving enough to live comfortably and travel upon retirement.

And while the impression that income and debt issues hold them back from investing is true, that’s not the whole story. The survey found that a lack of knowledge is also a major hurdle to investing, as cited by 39% of millennials without taxable investment accounts.

Then there’s the view that millennials are generally overconfident, which would likely bleed into their financial lives. In reality, only 21% of non-investing millennials and those with only retirement accounts were very or extremely confident about making investment decisions. But among those with taxable investment accounts, the figure rose to 47%.

The oft-cited need for independence among millennials has also contributed to the impression that they are skeptical of the financial services industry and, by extension, financial professional. However, 72% of millennials who work with a financial professional said they were very or extremely satisfied with their financial professional. And of those who don’t work with a financial professional, only 15% cited lack of trust.

The study also looked at whether millennials overestimate the amount of investable assets they need to work with financial professionals. A full 20% of the respondents thought there was no minimum amount required to work with a financial professional, while around 60% thought they needed $10,000 or less for a professional to work with them. Among the 42% of millennials who don’t know how much such advisors charge for their services, roughly three-quarters (77%) estimated the fee would be at least 5% of AUM.

Given millennials’ affinity for technology, one could assume they would naturally gravitate toward digital communication and robo advisors. But the survey found 58% of respondents prefer working in person with a financial professional, which is comparable to the trend for baby boomers (60%) and Gen Xers (58%). Overall, only 16% of millennials expressed a strong interest in using robo advisors.

Finally, the survey discovered that millennials aren’t a single homogeneous group; some subgroups are actually lagging behind. For example, millennials from rural areas were less likely to invest in the next five years, less confident in making investment decisions, and less likely to have full-time work. Female millennials, meanwhile, were also less likely to work full-time and less confident in investing, but they were more interested in growing their knowledge about investments.

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