New Study: Clueless Millennial Investors Think They’re Hot Stuff

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By Tom Teodorczuk | 10:11 pm, April 28, 2017

The widespread criticism of millennials- that they are over-optimistic when it comes to their own abilities but too pessimistic about people around them- will only be reinforced by a recent survey of wealth management trends in America conducted by AMG Funds.

Of course the millennial generation (18-34 year-olds) think they are fiscally smart.   AMG Funds surveyed 1,000 investors across all age demographics in the US with $250K+ in investable assets.

AMG’s report executive summary concludes: “Millennials are nearly twice as likely to consider themselves extremely or very knowledgable relative to Gen Xers and an astonishing four times more likely to consider themselves knowledgable compared to Boomer plus investors.”

There is further “astonishment”. The executive summary drily notes: “With that level of self-perceived knowledge, it is astonishing to note that millennials allocate one third less to equities than older generations of investors.”

Here’s another surprise- the report found a greater sense of entitlement exists among millennial investors than their elders: “They expect a much higher average annual return- 13.7% versus 8.6% among older investors.”

Millennials can’t derive all that consolation in the  long-term either. It turns out that “63% of Millennials define ‘long-term’ as less than five years versus 28% of older investors”.

The contradictions continued: “Millennials are simultaneously more concerned than older investors about their long-term future and likely to have shorter time horizons for needing capital and accessing their savings.”

Despite advancing technology being reckoned by many to have been a leading factor to the 2008 financial crisis, millennials are putting their faith in computer algorithms to guide them on the path to financial stability.

AMG Funds found that 66% of millennials are at least familiar with robo-advisors (digital investment services) and  71%  of them find robo-advising appealing- much more than any other demographic. (So 5% of millennials don’t know what robo-advisors are but think it’s- like- really cool because it’s got the word ‘robo’ in the title.)

Millennials don’t seem to trust humans with 74% of them believing that “financial advisors tend to recommend generic portfolios (versus truly customized advice). That is a shockingly higher rate than both Gen Xers (48 %) and investors age 52 and older (25%).”

The report noted that “advisors and their millennials clients need to work on a common aim: to fully understand what is required in the short term without sacrificing truly long-term needs such as retirement and children’s education.

“But getting millennial investors to partner successfully will be an uphill battle with the top two triggers being market/economic conditions and a desire to get into new investments.”

Translation: “Millennials don’t know much about finance even though they think they do and we’re not sure how to get them to be more financially responsible.”

The report concludes that “Millennial investors are fundamentally different.” Well, that’s one way of putting it…

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