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by Ned Dane on Jan 17, 2018 9:00:00 AM

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How High-Net-Worth Millennials Want to Manage Wealth

The largest transfer of wealth in American history is already under way, and it’s brought along a critical challenge that should be top-of-mind for advisors everywhere: What must an advisor do to retain the heirs of their high-net-worth clients?


How High-Net-Worth Millennials Want to Manage Wealth By Ned Dane


The largest transfer of wealth in American history is already under way, and it’s brought along a critical challenge that should be top-of-mind for advisors everywhere: What must an advisor do to retain the heirs of their high-net-worth (HNW) clients?


Just like their Baby Boomer predecessors, Millennials want to work with advisors they know on a personal level. They desire a personal relationship with the individuals they take financial advice from and will look elsewhere after receiving their inheritance if they don’t know the family advisor well.

If you don’t have a relationship with your clients’ Millennial heirs, make getting to know them a top priority. Lean on your clients to facilitate introductions if necessary, and find out what makes their offspring tick. Learn their interests. Assess their knowledge of investments and finance. Educate them yourself if the opportunity presents itself, which will help you become a trusted voice over time.

This is an ongoing process that won’t reap dividends overnight, but it will pay off in the long run if you’re persistent. Over the last two years, we’ve conducted a pair of in-depth studies of wealthy Millennials in partnership with Campden Wealth. Through our findings, it’s clear that this generation will remain loyal to advisors who know them and support their interests.


Define Their Investment Identity

So how exactly does the typical HNW Millennial look to invest their personal wealth, and what do they really think of the services that advisors provide?


We set out to answer these questions – and more – in our report: "Coming of Age: The Investment Behaviors of Ultra-High-Net-Worth Millennials." The report examines how the wealthiest members of the Millennial generation are managing their personal investments. It also sheds light on areas of overlap and divergence in how Millennials approach their personal and family wealth.

We surveyed a population of young adults who were born between 1980 and 1995. They’re now at an age where they enjoy growing influence over how their family wealth is managed. Through our conversations with them, we learned that their views on how to invest the family portfolio diverge in key ways from their parents’ and grandparents’ approach.


Only one-fifth of the Millennials we surveyed are fully satisfied with the objectives and guidelines of their family portfolio. A third of the Millennials we talked to said they plan to increase allocations to environmental, social and governance (ESG) investments.


Another third said they want to increase their family’s access to riskier, potentially less liquid strategies such as private equity or hedge funds. And 29 percent revealed that they plan to change their family’s long-term investment objectives.


As you work with Millennial clients, understand that you’re interacting with the most educated generation in American history. However, they still have much to learn when it comes to investing and wealth management.


Although they generally have a strong grasp of investment concepts and strategies, their interests and knowledge are largely concentrated in U.S. equities. There is an opportunity for advisors to educate Millennials on how to properly diversify their portfolio. As part of your value proposition, open their minds to the various ways different asset classes can benefit them in the long-run.


Millennials and Risk

Although wealthy Millennials have a natural inclination towards preserving family wealth, we were surprised to learn how focused this generation is when it comes to investment deals. One-in-four HNW Millennials has been involved in more than 20 deals over the past five years, and a solid 65 percent have played a role in five deals.


But only 35 percent place a premium on a clear and structured approach to due diligence before any major transaction, the survey shows. In our view, this points to an opportunity for advisors to demonstrate their value to Millennials by stepping in and educating them on the importance of due diligence in the deal-making process. Advisors can step up and become trusted second voices in assessing the quality of potential deals.


The Skeptical Generation

Advisors should be heartened by the fact that a clear majority of the Millennials we surveyed seek professional advice before making investment decisions. They’re not interested in robo advisors either – they’re looking for holistic, unbiased advice from trusted experts. On the other hand, we found some uneasy dynamics at work between advisors and Millennials as well.


Older Millennials who have experience working in their family office or in financial services expressed skepticism about the value advisors provide as well as their motivations. We even found a level of cynicism among this cohort about the fees advisors charge and the product recommendations they make.


But overcoming these views isn’t an insurmountable challenge. Savvy advisors will recognize that they can build strong relationships with Millennials over time through education and personal relationships. Ultimately, taking the time to understand the attitudes and priorities of this generation can position advisors to retain their clients’ heirs once the family wealth officially changes hands. 


Ned Dane is Head of OppenheimerFunds’ Private Client Group. Read an executive summary of the Coming of Age report to learn more about the investing identity of wealthy Millennials and check out his monthly column on advising wealthy families.


This article appeared in Advisor Today. 


Topics: Diverse Markets