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Millennials are a study in contrasts. They spend, but they save. They want connectedness, but need autonomy. They are sometimes labeled as lazy and entitled, yet these stereotypes are largely based on perceptions from a decade or more ago.

News flash! Millennials have grown up.

Now, Millennials (born 1981–1996) make up the largest living segment of the U.S. population,1 and they may also be the generation hardest hit by recent global and economic events.

Despite being the largest generation, Millennials control only 6.6% of the wealth in the United States — while Baby Boomers and Gen X together control more than 80% of the nation’s total assets.2

But those numbers could shift dramatically in coming years as older generations eventually embark in The Great Wealth Transfer. The intergenerational shift over the next few decades could see a seismic portion of that wealth end up in the hands of their Millennial heirs.

Financial advisors are left to decode this seemingly self-contradictory generation in order to establish, build and maintain trusted relationships with Millennials.

Easier said than done, as the contradictions that partially define them have also generated plenty of misinformation.

We’re debunking three popular myths about Millennials so you can better understand how to reach this generation, help them recognize and address their needs, and grow your business.

Myth 1

MILLENNIALS WERE NOT
AS AFFECTED BY RECENT ECONOMIC DOWNTURNS
AS OLDER GENERATIONS

The net effect of two once-in-a-generation events — the Great Recession and the COVID-19 pandemic — hit Millennials harder than other age groups in the span of little more than a decade, just as many were launching their careers.

  • 23% of Millennials with investable assets of $100,000 or, more said that the 2008 financial crisis had the greatest impact on them; 33% said the 2020 Global Pandemic had the most profound impact3
  • Approximately three in 10 Millennials (29%) dipped into savings accounts due to the pandemic4

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  • One in five Millennials (20%) accumulated new credit card debt4
  • 58% of Millennials indicate their financial situation has been negatively impacted by the pandemic4
  • 51% of Millennials said their employment was negatively impactedas a result of the pandemic, compared to only 30% of Baby Boomers4
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After watching wild market swings and economic upheaval through the years, Millennials appear to be applying what they’ve learned. After living through the pandemic, 83% have a strategy to protect against market risk, an increase from 71% in 2020. And 60% of Millennials are confident they’ll be able to prepare for and live in retirement based on their experiences.3

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ADVISOR OPPORTUNITY: Introduce risk control annuities and the importance of diversification

Millennials’ experiences may affect their investing habits, but they don’t have to think of their investment decisions as an all-or-nothing proposition. Have a conversation surrounding how risk control annuities and portfolio diversification may give them a voice in how to manage risk, protect savings and increase growth potential in ways that align with their personal investment comfort and confidence levels.

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31% of Millennials established and followed a budget as a result of the financial crisis that had the most impact on them.3

Myth 2

MILLENNIALS DON’T THINK ABOUT FINANCING THE FUTURE.

While the “You Only Live Once (YOLO)” mindset is a common stereotype applied to Millennials, the numbers suggest that they are making efforts to keep expenses in check. Despite generally spending less than older generations, they also may earn less, meaning those expenses take up a bigger percentage of their resources. Lower wages, inflation, market volatility and lingering debt may present obstacles to investing.

Annually, I spend money on…5

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Ongoing debt may be keeping Millennials from achieving their personal and financial goals, as many entered the workforce with higher levels of student debt than previous generations.4

 

MILLENNIALS ARE INCREASINGLY
FUTURE-FOCUSED

At first glance, their spending may appear to reflect little interest in saving for the future. In fact, Millennials are more likely than other generations to save in one or more types of accounts for healthcare expenses. About half (46%) say that building emergency savings is a priority, but most have only put away $5,000 for this purpose.4

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Borrowing from the future

44% of Millennials have dipped into their retirement savings, far more than any other generation, with 33% of Gen X being the runner up.4

Why? Millennials were more likely than other generations to cite debt as the top reason they borrowed from their retirement savings, among others:

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0
%

Paying Off Debt

0
%

Financial Emergency

0
%

Medical Bills

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0
%

Home Improvements

0
%

Purchase of Vehicle

0
%

Purchase of
Primary Residence

0
%

Everyday Expenses4

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18% of Millennials who took either a loan or hardship withdrawal from a retirement plan incurred taxes and penalties as a result4

On the whole, Millennials have learned from their financial past, and want to build a solid future.

  • The median age that Millennial investors started saving for retirement is 25, compared to age 30 for Gen X and age 35 for Baby Boomers4
  • Millennial workers plan to spend nearly three decades (27 years) in retirement4
  • Still, two-thirds (66%) of Millennials say they feel somewhat or very anxious about their finances (that number drops to 46% for people who work with a financial advisor, regardless of age)6
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78% OF MILLENNIALS HAVE A STRATEGY TO PROTECT AGAINST OUTLIVING THEIR SAVINGS BY LEVERAGING:

  • Social Security (47%)
  • In-plan income guarantees (38%)
  • Dividend yielding stocks (31%)
  • Longevity insurance/deferred income annuities (31%)3
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HOW MUCH DO MILLENNIALS RELY ON FINANCIAL PROFESSIONALS?

  • 66% actively seek the advice of financial professionals3
  • 33% of those who work with a financial professional say they do so to feel more secure about their financial future3
  • 78% would like more information and advice from their employers (plan sponsors) on how to reach their retirement goals4
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WHAT TYPES OF SERVICES DO MILLENNIALS WANT FINANCIAL ADVISORS TO PROVIDE?

  • 45% — investment recommendations (mutual funds, annuities, stocks, bonds, etc.)
  • 43% — general financial planning (college funding, budgeting, etc.)
  • 38% — strategies to ensure savings last a lifetime, and tax planning
  • 36% — to calculate retirement savings goals
  • 35% — recommendations on retirement-related health, life and long-term care needs4

85% of Millennials are likely to choose an annuity to protect against market risk3

Even though Millennials are pursuing opportunities to improve their financial status, nearly one-third (30%) liquidated assets from their qualified retirement savings plan to cover financial obligations during a financial crisis.3

 

ADVISOR OPPORTUNITY: Recharacterizing Socially Responsible Investing

Help your Millennial clients define and refine what they care about, and introduce them to socially responsible investing (SRI) and social governance standards (ESG) companies they may not be familiar with but warrant investment consideration. With your guidance, Millennials could end up with the best of both worlds— investments with social impact and solid returns.

Generally, Millennials are passionate about making the world a better place, and their demands have driven increases in SRI and ESG options. They want a world in which financial gain and sustainable impact are not mutually exclusive.

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More than half of Millennials (56%) are confident in their ability to protect their finances in the event of another financial crisis (compared to 43% of Gen X and 33% of Baby Boomers) 3

Myth 3

MILLENNIALS PREFER ROBO-ADVISORS TO HUMAN FINANCIAL ADVISORS.

Nearly all Millennials (98%) say they use the internet,7 and their use of smartphones is ubiquitous. There’s little doubt these digital natives are more comfortable with technology than previous generations.

But virtual interactions aren’t a replacement for the human touch. About two-thirds (68%) of Americans, including Millennials, who could only have digital interactions during the pandemic said that they were useful but weren’t a replacement for in-person contact.8

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While they acknowledge the convenience and ease of digital apps for managing their money and investments, Millennials also recognize that as life’s complexities expand beyond the limits of a robo-advisor, the need for an experienced, trusted advisor increases.

24% of Millennials reported that they didn’t work with a financial advisor prior to the pandemic but do now.6 Perhaps it’s because 80% of people who had professional help said they were able to build their savings during the pandemic compared to only half (49%) who didn’t work with an advisor.6

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Potential obstacles to saving for retirement

  • 44% of Millennials have or will have served as caregivers during the course of their working careers, more than any other generation
  • 20% of Millennials cite supporting their parents as a priority
  • Most Millennials are concerned that Social Security will not be there for them
  • 27% of Millennials have saved less than $25,000 for retirement4

Outlook on retirement

  • The top dreams for retirement among all generations are traveling, spending more time with family and friends, and pursuing hobbies
  • 59% of Millennials are planning to work in retirement
  • Nearly one in three (31%) fear feeling isolated and alone4

Millennials’ unique income, debt and inheritance circumstances, together with their openness to new ideas and willingness to engage with innovative options like automation and fintech, make them well suited to a holistic, individual and educational approach to financial planning.

More than four in 10 financial professionals (41%) say that Millennials are a primary target for new clients.3 Understanding the realities of this group’s needs, expectations and challenges, and helping them embrace their financial power, is a growing necessity for them, and for your business.

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To learn more about harnessing the power of risk control for your clients, visit smartriskcontrol.com, contact your Regional Sales Director or call the CUNA Mutual Annuity Solutions Desk at 877.345.GROW (4769), option 1.

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