Advisors Should Monitor Millennial Inheritance

High-net-worth (HNW) millennials and those with the potential to become wealthy present opportunity for financial advisors looking to grow their client base. But financial firms are overlooking future HNW Generation Y-ers, according to a survey by TD Ameritrade. 

The survey, Gen Y Investor Insights: Millennial Millionaires in the Making, queried 536 investors aged 18-39. It defines HNW millennials as those with more than $500,000 in investable assets and potential HNW millennials as those with $25,000-$500,000 in investable assets and an annual household income of $150,000 or more. Mass affluent millennials, meanwhile, have an annual household income ranging between $50,000-$149,000 and investable assets of $25,000-$500,000.

Millennials are expected to inherit trillions of dollars from baby boomers that have long relied on registered investment advisors (rias), the survey points out. “advisors can’t wait until this next generation is wealthy before they start rolling out the red carpet. this transition is happening now,” said tom nally, president, td ameritrade institutional in a statement. “our latest research shows rias would be well served pursuing young investors who may not have great wealth yet, but who have high earnings potential and are eager to work with a professional advisor.” (for more, see: Tips for Handling Client Inheritance.)

Wealthy millennials are more likely (65%) to use an advisor than their high-potential peers (33%). Fifty-five percent of high-potential millennials with an advisor hired their own but only 29% plan to keep their family’s advisor. The good news is that almost 70% of this group wants an advisor to help manage their finances. (For related reading, see: Financial Advisors Need to Seek Out this Group NOW.)

Sixty-three percent of wealthy millennials with an advisor kept their family’s advisor and have no plans to change. Only 23% were connected to an advisor through a referral by a friend or colleague, compared to 44% of potentials and 49% of mass affluent millennials. (For related reading, see: The Changing Wealth Demographic — And How to Leverage It.)

Wealthy millennials are more likely to choose an advisor who is a contemporary versus someone older. This presents opportunity for young advisors. In addition, almost half of this group are women, which indicates a growing need for female-friendly practices. More than half (58%) of potential HNW millennials and the mass affluent (55%) surveyed said they would prefer an advisor who is older than them. (For more, see: A Financial Advisor's Guide to Millennial Clients.)

Millennials overall are predominantly “validators,” the survey found. This means they want an advisor to help manage their finances, but expect to play a significant role in making decisions.

When it comes to communications millennials in general expect advisors to be accessible and immediately responsive. High-net-worth millennials prefer a variety of options when communicating with their advisors ranging from e-mail and phone calls, to in-person meetings and social media. High-potential and mass affluent millennials prefer e-mail by a wide margin. (For more, see: How Financial Advisors are Leveraging Social Media.)

The top retirement concern for all three groups is outliving their savings. The second top concern for the potentially wealthy and the mass affluent is having to work longer to supplement income followed by coping with healthcare expenses. Wealthy millennials are also concerned with coping with healthcare expenses followed by the expense of caring for an elderly parent or relative. (For related reading, see: Retirement: Which Generations are the Best Savers?)

Financial advisors looking to grow their practices should hone in on potential high-net-worth millennials. They are the most overlooked of this generation by financial services firms while at the same time offering the most potential. (For related reading, see: Now is the Time to Snag Gen X Clients and How to Plan for the Charitable Giving Boom.)