Financial services industry throwing out rule book to attract millennials

Published May 22, 2016

MINNEAPOLIS — Enough with the stereotyping of millennials living in their parents' basement and drowning in college debt.

That may be true for some right now, but the 35-and-under crowd makes up the majority of America's labor force. It's just a matter of time before they're on their way to financial independence.

The financial services industry, which has long been focused on serving well-heeled baby boomers, is waking up to the fact that millennials and their older brethren, the Generation Xers, represent a future gold mine.

Not only are young professionals heading into prime earning years, but this next generation of potential investors also stands to inherit an estimated $30 trillion in assets from their elders over the next three to four decades, partaking in the world's largest generational transfer of wealth.

"How do we start to connect with the 25- to 45-year-old who doesn't have the juicy million-dollar portfolio and the gray hair just yet, but really is going to be the lifeblood of our business five, 10 or 15 years down the road?" asked Matt Cosgriff, a 27-year-old millennial and financial adviser, who convinced his bosses at BerganKDV Wealth Management in suburban Minneapolis to let him develop a line of business tailored to young professionals.

At Lifewise, which Cosgriff started in September, the approach is geared to a generation whose financial values, styles and needs are far different from their parents and grandparents.

Busy young professionals don't want lengthy meetings in a glassy office. They are fine with a online chat or using Web-based tools as a starting point and checking in via text or email, Cosgriff found.

"Baby boomers are much more in tune with delegating to an adviser: You do it. We trust you," Cosgriff said. "Millennials are skeptical of financial services in general. They are skeptical of Wall Street, skeptical of big banks. Young people want to partner with someone they trust. They want to see some options and have a say in what's going on."

Financial experts say millennials and Gen Xers will need to start saving much more aggressively than previous generations.

One recent report estimated that people in their mid-30s will need about $1.8 million to enjoy an easy retirement, based on predicted inflation rates and possible reductions in Social Security.

More of the responsibility will land on their shoulders than in previous generations. Precious few can count on a guaranteed pension, and more young people are earning money through the "gig" economy, relying on freelance jobs and short-term assignments. Even those with a 401(k) plan at their workplace must figure out how to manage among dozens of investment choices.

The time to engage this younger generation is now, urged a 2012 report by Pershing LLC aimed at investment professionals. Young people tend to be less satisfied with their current financial advisers, the report noted, and those who inherit wealth seldom keep assets with their parents' investment professionals.

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"The next generation trusts algorithms, logic, their peers," said Lisa Steffes, CEO of Brightpeak Financial, a new division of Thrivent Financial geared toward young investors. "They believe in simplicity, transparency.

"They need guidance on their own terms — which does include, how do I get out of my student debt," she said. "And they do like experiences, they do value dinner out, they do value travel. Good financial planners can figure out how to bring those values into the fold."