How Advisors Can Add Wealthy Millennials as Clients

Written by: Ned Dane , Head of Private Client Group, OppenheimerFunds

Anyone with children knows how challenging it can be trying to figure out why they do what they do. As a parent, I’ve certainly spent a good deal of time thinking about what my kids are up to and trying to anticipate their next step – always with the goal of steering them in the right direction!

Most parents would agree this is simply part of the work that must be done to ensure our children lead healthy, fulfilling lives.

In your role as an advisor, you want to see your clients’ children and grandchildren succeed as well. Of course, your ultimate goal is to ensure that once family wealth is passed down, the next generation recognizes the value you provide and retains your services.

This is a top-of-mind concern for any forward-looking advisor, particularly as Millennials – the generation born between 1980 and 1995 – begins inheriting $30 trillion from Baby Boomers in the largest intergenerational transfer of wealth in American history. 1 Unfortunately, industry research shows that advisors are facing an uphill battle in keeping Millennials in the fold once this shift occurs.

According to Investment News, 66 percent of adult children fire their parents’ advisor after receiving an inheritance. Millennials want to work with advisors they know and have personal relationships with. Any advisor who’s worked with wealthy individuals for years but has failed to cultivate relationships with their heirs is at risk of being replaced once the next generation starts calling the shots.

So what’s an advisor to do? First – get to know your clients’ children and grandchildren on a deeper level. Ask your clients to break the ice if you must and learn what their heirs are passionate about. Set aside time to assess what they know about investing, and help them close any gaps in their knowledge.

Each of these steps will help you to establish a relationship and build trust over time.

To assist advisors in this effort, OppenheimerFunds recently partnered with research firm Campden Wealth to study the investment views and behaviors of wealthy Millennials. We recently published our 2017 report: “Coming of Age: The Investment Behaviors of Ultra-High-Net-Worth-Millennials.”

Here’s a snapshot of what we learned:

1. Millennials have a strong appetite for impact investments.

Impact investing is their asset class of choice. Wealthy Millennials are actively looking to expand access to quality education; improve living conditions for the less fortunate, ensure gender equality, and protect the environment for future generations. But they’re looking to earn steady investment returns in the process. As part of this effort, they plan to incorporate environmental, social and governance (ESG) standards to their family portfolios moving forward.

2. Most wealthy Millennials seek professional input before big financial decisions.

A clear majority of the Millennials we studied told us that they seek advice from professionals before making big investment decisions. They generally view advisors as an important source of knowledge and advice.

3. They approach personal and family wealth differently.

In terms of their personal investments, Millennials are invested in asset classes that are widely perceived as moderately risky. U.S. stocks and real estate, as well as cash, account for over half of the average UHNW Millennial portfolio. As for the family portfolio, we’ve found Millennials to be broadly conservative in their approach, with a focus on wealth preservation.

How Millennials Will Transform the Family Portfolio

For years, Millennials have enjoyed growing influence in how their family wealth is managed, but they have some markedly different views on investments than their parents and grandparents. In fact, only 21% of those we surveyed said they’re fully satisfied with the current objectives and guidelines of the family portfolio.

33% of the Millennials we interviewed said they will invest family assets in less liquid strategies like hedge funds or private equity. Another third said they will increase allocations to impact investments. And nearly 30% indicated they will change their family’s long-term investment objectives.

Millennials Have a Healthy Appetite for Risk

This generation has come of age during the longest bull market in U.S. history. They witnessed the bursting of the dotcom bubble and the 2008 market crash in their youth but much of their investment experience has come with the markets generally moving in one direction – up.

As a result, they’ve grown more comfortable with risk-taking. We were surprised to discover how active they are when it comes to investment deals, with 52% noting they’ve been involved in between five and 20 deals over the last five years.

Advisors can use these findings as a launch point for a discussion with wealthy Millennials about the importance of building a properly diversified investment portfolio. This can also be an opportunity for advisors add value in the portfolio construction process.

The Millennial Definition of a Good Advisor

Millennials are unambiguous in their view of what makes a good advisor. 88% of those we surveyed cited fee levels and transparency as critical aspects of a good advisory service. 81% said close personal relationships are important, and nearly 70% said depth of service and track record/performance are the traits that make a good advisor.

In terms of their most trusted sources of advice, 75% cited their family office executive and 63% said their financial advisor. As for their least trusted sources, 75% cited their commercial bank, while 56% said robo advisors.

The message for advisors is clear. Millennials are looking to work with you as long as they know you well and trust you. Those who are able to help Millennials find the investment deals they’re looking for and work with them collaboratively in close partnerships that emphasize due diligence will find their services in strong demand with the next generation.

Click here to download the “Coming of Age: The Investment Behaviors of Ultra-High-Net-Worth-Millennials.” Research Report.

Learn more about how we challenge investing misconceptions by considering ESG.

Related: Want to Attract HNW Millennials? An ESG Strategy May Be the Answer

The alternate weighting approach employed by the Fund (i.e., using revenues as a weighting measure), while designed to enhance potential returns, may not produce the desired results. The stocks of companies with favorable ESG practices may underperform the stock market as a whole. Because the Fund is rebalanced quarterly, the Fund may experience portfolio turnover in excess of 100%. The greater the portfolio turnover, the greater the transaction costs to the Fund, which could have an adverse effect on the Fund’s performance.

Carefully consider fund investment objectives, risks, charges, and expenses. Visit or call your advisor for a prospectus with this and other fund information. Read it carefully before investing.

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1Source: CNBC, Feb. 16, 2017