Watch Out, Wealth Managers - Affluent Millennials Could Fire You Soon, US Study Says

Up and coming Millennials in the US with at least $100,000 in investible assets control the largest chunk of “at-risk” assets run by full-service advisors in the US, and almost half (48 per cent) of them expect to fire their current provider in the next 12 months, a survey finds.

The JD Power 2017 US Full Service Investor Satisfaction Study shows that the willingness of such emerging Millennials to walk away from existing providers contrasts with only 8 per cent of other generations of investors who take the same view.

The impatience that such investors hold towards advisors is a wake-up call for the wealth industry, the authors of the report said.

"Wealth managers have been slow to focus on Millennials because they don’t yet have the assets Boomers do, but when looking at potential money in motion - even in the short term - the picture looks quite different," Mike Foy, director of the wealth management practice at JD Power. "With the emergence of robo-advisors and self-directed platforms, investors have more options than ever, both within and outside the traditional full-service channel."

The report claims it has captured “the clearest evidence to date of a historic generational shift that is currently unfolding in the wealth management space.”

While emerging affluent Millennials still represent just 8 per cent of the overall available investable asset pool, they represent 55 per cent of assets held by investors who are currently at risk of leaving their current investment firm.

Some 54 per cent of full service investors have a documented financial plan and while those plans generally address retirement planning, these investors are much less likely to feel they are addressing other financial goals that are a higher priority for Millennials.

Loyalty premium

The firms that are able to create loyalty among Millennial clients today can expect significant ongoing rewards, the report continued. Among those clients identified as highly likely to recommend, Millennials made more positive recommendations during the past 12 months (an average of 8.1 per client) than did Boomers (3.3 per client) and Gen X (3.7 per client) combined. But advisors and firms need to actively cultivate this referral source: Millennials indicated they would be more likely to provide referrals if their advisor asked (40 per cent) or they were incentivized to do so (39 per cent), it said.

One-fourth (25 per cent) of full-service Millennial investors have either tried, or are actively using, a robo-advisor platform and 28 per cent of them rate their satisfaction with this platform higher than for their full-service firm. Also, more than one-third (34 per cent) have a secondary self-directed account, suggesting a flexibility and openness to a variety of service models not exhibited by investors in other generational groups.

Study rankings

Charles Schwab ranks highest (838) in overall investor satisfaction for a second consecutive year, followed by Fidelity Investments (835) and Edward Jones (833), the report said.

The survey, now in its 15th year, measures overall investor satisfaction with full service investment firms in seven factors (in order of importance): financial advisor; investment performance; account information; product offerings; commissions and fees; website; and problem resolution. This year, overall investor satisfaction is up 15 points to 819 (on a 1,000-point scale) from 2016.

The study was fielded in January 2017 and is based on responses from more than 6,500 investors who make some or all of their investment decisions with a financial advisor.


Nick Kalikajaros 2017