Millenials and Gen Xers distrust investment advisors, meaning RIAs have a lot of work cut out for them in building trust with mid-lifers and career entrants who need to save for their future. They don’t know how, other than throwing it into an employee 401k and leaving it alone. What do they need an RIA for? Besides, there are too many products and too much information. RIAs have to be a combination of hand-holding psychologists and layman educators on the workings of financial markets in order to entice new clients.
“The general recommendation is that you should have six times your salary saved by the time you are 50 years old, if you wish to retire by the age of 67,” says Nicole Mayer, a partner at
RPG-Life Transition Specialists. “It’s really important for young people to start right now if they don’t want to be scrambling for savings when they are older. But getting them to save for their golden years can be incredibly difficult, especially as this new research shows that young people are hesitant and cynical about the choices retirement advisors make for them.”
Mayer was citing a Scottrade 2017 Retirement Study released on March 28.
The report says that most investors do not like the advice they receive from RIAs. They claim to be overwhelmed and confused and that’s left them more cynical about retirement than baby boomers. Some 61% of the survey respondents said they wished they had access to “reliable guidance.”
“It’s notable and, to be frank, disconcerting that the survey results show us that actually using an advisor doesn’t appear to lead to greater clarity or confidence,” says Brian Stimpfl, senior vice president and Head of Scottrade Advisor Services. “But it’s important to take these findings and recognize that there is an opportunity for advisors to come alongside their clients and build trust by not only providing additional information, but also guidance to understand what options are best for their individual needs.”
Boomers and the elderly already trust their RIAs. The younger guys do not. The bullet points below are culled from Scottrade’s press release dated March 28.
Younger investors are more likely to say:
- They wish had access to trustworthy retirement investment guidance (80% Millennials and 72% Gen Xers vs. 49% Boomers and 40% Seniors)
- There is too much info to decipher, says 62% Millennials and 53% of Gen Xers vs. 42% for Boomers and 31% Seniors)
- They don’t understand the products, says 57% Millennials and 52% Gen Xers vs. 31% Boomers and 28% Seniors)
- Their advisor sometimes recommends products and solutions that are in their advisor’s own best interests, says a whopping 67% Millennials and 64 % Gen Xers vs. 22 % Boomers and 15% Seniors)
When overwhelmed with info and confusing product descriptions (whole life or universal life…or an annunity?), they will:
- Spend less time thinking about their retirement goals: 71%
- Wonder why they are paying so much in fees for something they barely understand: 58%.
- Want an advisor who can explain how these products work, differ from similar financial products, and why they might want to buy them: 78%
- Doubt they will ever have enough money to retire. Only 26% are confident they will have enough money saved for retirement.
- Believe retirement is a figment of their imagination: 41%.
Mayer from RPG-Life Transition Specialists agrees with Scottrade, saying she has found her younger clients saying that they are being sold financial products they don’t understand, and may not need.
“People are hungry for information and do not want to be sold to,” Mayer says. “Millennials and Gen-X’ers should look for advisories who are fiduciaries and are paid to educate them and give advice with no further obligation.”
