There are seven myths about millennials which contribute to them not getting involved in securities investing and trading.
That was the conclusion of a recent FINRA, Financial Industry Regulatory Authority, study entitled: “Uncertain Futures: 7 Myths about Millennials and Investing, Full Report.”
FINRA’s Gerri Walsh and Gary Mottola, the authors of the report were the latest guests on FINRA’s podcast entitled, Unscripted, where they talked about the findings.
Millennials are those born between 1981-1996.
The seven myths are as follows: millennials have lofty goals, income challenges and debt are the key barriers for millennials who don’t invest, millennials are overconfident and this spills into their financial lives, millennials are wary of the financial services industry, millennials overestimate the investable assets needed to work with a financial professional, millennials want advice digitized, and millennials all think alike.
Walsh, who said she is the mother to several millennials, said “in my own household, I know that’s not true,” of the last myth that all millennials think alike.
The study also found that a lack of understanding of trading and investing keeps many millennial’s out of the markets: “While debt and income are major barriers, a lack of knowledge is also a major hurdle to investing.” The study noted.
Rather than shunning human advisors, millennials “who use a financial professional are highly satisfied and view the relationship as collaborative. Those not using a financial professional say the main reasons are perceived expense and lack of resources, not lack of trust.”
Furthermore, millennials had limited knowledge of robo-advisors, the study found further.
Mottola noted on the podcast that millennials overestimate the fees of advisors, with 75% believing that advisors make five percent on any investment.
“That shocked us quite frankly,” Mottola said, “And it gives the financial services industry a chance to educate them.”
Walsh noted that while fees vary, investment advisors who are registered with FINRA normally charge between 1-2% of an investment portfolio’s total value.
Brokers, Walsh said, charge per trade but charge as little as $4.95 per trade.
Mottola said that approximately 75% of those millennials who used an advisor were satisfied with their experience.
Millennials thought that advisors should take a wholistic approach, rather than trade by trade: “In general, millennials think the ideal role for a financial professional is between holistic financial planning and a focus on investment management.” The study noted.
The study also found that millennials are far more concerned with paying bills than they are with investing; the study found that paying monthly bills, paying off credit cards, student loans, and mortgages ranked ahead of building an investment portfolio for retirement.
The study found relatively little interest in crypto-currency by millennials: “6% of millennials have invested in cryptocurrency and 16% are very familiar with this investment category.” The study noted also.
