CFA Institute and FINRA Foundation Study Debunks Common Myths about Millennials and Investing

Conventional wisdom paints a picture of millennials as aggressive, knowledgeable, and confident when it comes to investing, buta new research study sponsored by CFA Institute and the FINRA Investor Education Foundation debunks common assumptions about millennial investors. The research, titled “Uncertain Futures: 7 Myths About Millennials and Investing,” explores the attitudes and behaviors of millennials when it comes to finances and investing.

According to the research, the majority of millennials lack confidence in financial decision-making and show little interest in robo-advisors. Despite coming of age in a digital world, they prefer to work face to face with a financial professional. The study measures the attitudes of millennials with no investment accounts, those with only retirement accounts, and those with taxable investment accounts.The research also compares millennials with taxable accounts to Gen Xers and Baby Boomers with taxable accounts, to determine how the investing behavior of these three generations differs. In addition, the study examines the pathways that millennials follow to investing, and why some have no investment accounts.

Millennial Myth vs. Reality

“This study dismisses many of the assumptions that are commonly held about millennials and why many of them are not investing,” said FINRA Foundation President Gerri Walsh. “These findings help us better understand the needs and wants of millennials to further enhance investor education efforts that will engage millennials in the financial markets.”

The survey debunks the following myths about millennials and their investing behavior:

Myth 1: Millennials have lofty financial goals.

• Reality: Contrary to conventional wisdom, millennial investors and non-investors expect to retire at the standard age of 65. Non-investing millennials have very modest financial goals and are focused on surviving month-to-month. In contrast, the financial goals of millennials with taxable accounts mirror those of Gen Xers and baby boomers, such as “saving enough to retire when I want and live comfortably.”

Myth 2: Income and debt are the key barriers to investing.

• Reality: While income and debt are important, 39% of millennials without taxable investment accounts state that not having enough knowledge about investing is also an important barrier. 

Myth 3: Millennials are overconfident in general, so they are probably overconfident about investing.

• Reality: Far from being overconfident, only 21% of non-investing millennials and millennials with only retirement accounts are very or extremely confident about making investment decisions. This figure increases to 47% for millennials with taxable accounts.

Myth 4:  Millennials are skeptical of the financial services industry and by extension, financial professionals.

• Reality: Millennials acknowledge and respect the expertise that financial professionals can provide. Nearly three quarters (72%) of millennials working with a financial professional are very or extremely satisfied with their financial professional. Only 15% of millennials not working with a financial professional cite lack of trust as a reason.

Myth 5: Millennials overestimate the investable assets needed to work with financial professionals.

• Reality: In fact, millennials underestimate the investable assets needed to work with a typical financial professional. Twenty percent of millennials believe there is no minimum amount needed to work with a financial professional. About six in 10 believe a financial professional would work with them if they had $10,000 or less to invest. Millennials also lack guideposts for pricing financial advice. Forty-two percent of millennials do not know what financial professionals charge for their services. When asked to estimate, they guess high: 77% believe financial professionals charge 5% or more of assets under management. 

Myth 6: Millennials gravitate toward electronic communication and robo-advisors.

• Reality: Despite their affinity for technology, 58% of millennials prefer to work face to face with a financial professional, on par with Baby Boomers (60%) and Gen Xers (58%). Only 16% of millennials show strong interest in using robo-advisors.

Myth 7: Millennials are all the same and have similar investing attitudes and behaviors.

• Reality: This is not a homogeneous group. For example, urban millennials are 50% more likely than rural millennials to own taxable investment accounts. Thirty-three percent of male millennials are extremely or very confident in their financial decision-making, compared to only 23% of female millennials. Twenty-eight percent of white millennials have taxable accounts compared with 20% of African-American millennials.

Other important survey findings include: 

• The workplace is a major on-ramp for the road to investing; millennials without access to an employer-sponsored retirement plan may be getting left behind.

• Innovations in investment products and services currently hold limited appeal for millennials.
• When it comes to working with a financial professional, 58% of millennials say they prefer to work face to face, which underscores the importance of human interaction and communication.
• Compared to prior generations, millennials who do invest more often start when they are young — before age 21.
• The study highlights the importance of parents and family members in the decision making process. Forty-six percent of millennials with investment accounts cited parents and family as key factors in their decision to start investing.

“Millennials are expected to inherit more than $40 trillion in the coming decades,” said Bjorn Forfang, deputy CEO of CFA Institute. “By providing insights into investment preferences and concerns, this research can help financial professionals engage and better serve the needs of the next generation of investors. Investment professionals who take time to demonstrate that client interests are paramount can expect to earn the trust of millennial clients.”

More information about the study — including the survey instrument, data and additional details about the methodology —can be found at www.finrafoundation.org or www.cfainstitute.org.