Millennial and Generation Z investors are building wealth so quickly that the "demographic is becoming impossible for financial advisors to ignore," according to a new study.
The wealth management industry has given these
To be sure, many advisors and other financial professionals are already working with younger clients — especially
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How advisors and other experts view younger clients
Many younger people are looking for a financial "coach" rather than an investment manager, said Raman Singh of Phoenix-based
"I like working with younger clients — the Gen Zers and the millennials — simply because the idea of financial planning is a lot different for them than the baby boomers," Singh said in an interview. "They like the idea of working with a financial planner who keeps them accountable."
Advisor Palash Islam has built his advisory practice, San Ramon, California-based
"I went after people like 20 years ago who were high-performance professionals," Islam said. "That's the advantage of building these relationships over 20 years, because now we're in our 40s, and everyone's balling."
At Bedford, Massachusetts-based
"Back in the day, the financial advice industry had to pursue and cold-call people, and today a lot of people recognize that doing financial planning is important," Ahmed said. "They haven't even reached peak accumulation yet. They're starting in their career — meaning they're going to be accumulating for decades — and as their lives become more complex, there are going to be more things you're going to be doing with them."
The findings that younger generations' wealth is expanding came as no surprise to
"I've observed a strong entrepreneurial spirit and a willingness to explore alternative avenues for financial growth. Many are leveraging technology and digital platforms to start businesses, invest in stocks and cryptocurrencies and engage in side hustles," she said. "The increasing accessibility of financial education resources, both online and offline, has empowered them to make informed decisions about their money and investments. Younger generations have endless financial advice and information at their fingertips."
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By the numbers
Between 2019 and 2022, overall household wealth climbed 13% to $66.06 trillion, the Cerulli report showed. Over that span, the total financial assets of millennial and Gen Zers soared by 40% to $5.98 trillion, while their average net worth jumped 34% to $135,774. Both represent the lowest amount of any of the age groups. However, even when taking into account the "increase of these households as more Gen Zers reach adulthood and live independently," the numbers display "a strong rise in overall wealth," according to the Cerulli report.
"What drove a lot of the financial growth in that time is people got into the stock market in a big way," John McKenna, a Cerulli research analyst in the firm's
Other key findings from the report include:
- The share of millennials and Gen Zers who own homes increased by five percentage points over three years to 53%, marking the first time that a majority own their primary residence since Cerulli has been tracking the data about them.
- At least 55% participate in a 401(k) plan, hold individual retirement accounts or are saving up a nest egg for after their careers in some other way, compared to 49% three years earlier.
- The percentage of millennials and Gen Zers who own individual stocks surged by nine points to 22%, while those holding pooled investment assets such as mutual funds or ETFs ticked up by three points to 9%.
- Higher levels of debt remain a concern for this age group: Total debt shot up 53% to $6.07 trillion, and average debt escalated 33% to $137,910.
- "At 44 million households strong—and counting—this younger cohort increasingly is becoming impossible to ignore. With their financial wealth growing at a massive rate alongside the complexity of their assets, they are prime candidates for formal advice relationships beyond just a brokerage account and a local bank teller," the report said.
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Lessons for the future
With more young advisors coming into the profession and adding to "a slowly increasing push to bring on millennial clients," the wealth management industry is coming around to millennial and Gen Z clients, McKenna said. The generations will push the industry to put more emphasis on ESG-tied investing and, possibly, develop more expertise in cryptocurrency, he said.
"There is also the question of succession planning within advisory shops," McKenna said, noting that there is still a lot of resistance to cryptocurrency. "There are still many advisors who wouldn't touch it with a 10-foot pole."
Ahmed rejects the idea of cryptocurrency, but he takes the approach of trying to speak directly to younger investors on social media with an approach of "Let me tell you why it's stupid" rather than a dismissive tone, he said. He often reminds college students pursuing a career in planning to be "a farmer, not a hunter" because the "business is about relationships," Ahmed noted. Younger clients could forge change in the industry over time.
"The industry still is almost hostile to women, certainly to minorities. The industry is evolving reluctantly at a glacial pace," he said. "Hey, industry, if you're listening, you dummies, you need to hire the young people so you can work with young people."
Advisors seeking younger clients should be moving away from "just talking about investments" to a long-term, goals-based outlook that is "giving them their options of what they can do and what they should do and what they should not do," Singh said.
"The days of an advisor charging
They may also need to learn "to serve them for what their needs are" and "meet them where they are," Islam said. For him, that means serving a diverse base of people from many religious and ethnic backgrounds and being willing to discuss topics like the Israel-Hamas war with clients.
"The ability to build deep, meaningful relationships is there," Islam said. "My job as an advisor is to have uncomfortable conversations. That's why people come, and that's why people stay."
