Wealth Among the Generations

America’s wealth is beginning to move from older generations to younger generations. For the sake of this blog, the Baby Boomers make up the older group, while Gen X, Millennials, and Gen Z make up the younger half. The latter approach their financial well-being differently than their parents and grandparents, sparking wealth advisors to reevaluate how they manage client relationships. Expectations of trust, involvement, and contact vary between the younger age groups, making an already personalized experience more nuanced for relationship managers. Outside influences and external sources of knowledge are becoming more popular among Millennials and Gen Z, with the internet and social media continuing to intertwine with our everyday lives. The Great Wealth Transfer is set to exchange half of the country’s wealth over the next two decades, and wealth management relationships will evolve as well.

Interactions between clients and their advisors are a distinct difference between the generations. Baby Boomers continue to prefer in-person communication, while Millennials and Gen Z are looking for more ways to interact digitally. 25% of Gen Z and 29% of Millennials were more likely to work with an advisor that is more tech-forward outside of in-person meetings. This group doesn’t want to replace their advisor with tech but is instead looking for digital solutions to handle simple administrative tasks without going through formal channels of communication. Gen X wants the best of both worlds, highlighting the society they grew up in. “Digital immigrants” as they are known, knew a world that didn’t rely so heavily on technology but adapted quickly as it became more influential. They share the sentiment that everyday tasks should be easily accomplished through digital solutions but still prefer more interactions with their advisors. Societal influences have affected how generations handle communication, technology, and attitudes toward financial health.

Unlike their predecessors, Millennials and Gen Z are seeking financial guidance at an earlier age. A 2024 study by Northwestern Mutual found Millennials are looking for advisors at age 29, Gen X started around 38, and Boomers sought their advisors around age 49. Financial health, or lack thereof, during the 2008 recession is attributed to the preemptive, almost fearful, response Millennials and Gen Z have toward the future of their finances. While proactive, the younger generations do not trust as easily as the Baby Boomers before them. An estimated 87% of Gen X and Millennials would seek an advisor other than one their parents worked with. Gen X, specifically, trusts themselves almost 2X  more than anyone, including financial advisors. The “latchkey kid” generation defines themselves by their work ethic and determination to “do it yourself”. However, most report not feeling financially secure and on track for retirement. Gen X is expected to receive the majority of the wealth during the Great Wealth Transfer, yet only one in four is comfortable working with a financial advisor. In fact, they are the generation that is least likely to have a relationship with an advisor. Many Gen Xers trust themselves to handle investments and a financial plan but are faced with aging out of their best earning years as time goes by. Advisors must find a way to connect with this generation and build trust. Trust is built on common ground, an advisor that has worked with their parents will have a different approach to life. Younger advisors adapt more quickly to changing technology and will utilize nontraditional methods of connecting with their clients.

The influence of social media and the internet has created a space for younger generations to expand their financial knowledge via parasocial relationships. Like never before, individuals are trusting figures who use social platforms to share financial advice. Social media influencers have taken the most popular form of marketing, word of mouth, to a new level. Influencers are often normal, relatable people who start their social media presence as a hobby to speak about their interests. Influencers gain credibility and trust as their audience grows and can organically promote a product. Before social media, celebrities appeared in 30 to 60-second loan or credit card commercials, which pales in comparison to the 3+ minute videos that can now be found online. Despite social media influencers having large audiences, parasocial relationships develop, and fans feel personally connected to the creators they follow. The ease and unlimited access to knowledge have made money a more approachable conversation topic. However, no regulations or rules are preventing these influencers from sharing incorrect, outdated, or skewed information. Younger generations are more comfortable discussing their financial health openly, and many do so online using platforms like TikTok and YouTube. Advisors aren’t utilizing these platforms to connect with younger generations; instead, they can be found using LinkedIn and Facebook, which are frequented by older generations. In early 2021, self-investors (majority M0illennials) engaging in the Reddit forum, r/WallStreetBets, began rapidly purchasing stock of GameStop using Robinhood. Robinhood quickly responded (on social media) and communicated to users that they would no longer be able to purchase GameStop stock, causing controversy and implications for self-traders while investment advisors were able to continue investing in the stock. The unprecedented storm of events led to the suicide of one self-investor after believing he had accumulated over $700,000 in trading losses on the app. The inexperience and lack of knowledgeable, professional guidance highlight the opportunity advisors have to connect with individuals wanting to invest. A robo-advisor is an accessible option for young individuals who want to invest but lack the skills to do so. While platforms exist to combine the robo-advisor and wealth advisor experience, Gen Z and Millennials are drawn to self-directed investing. Yet, only 1 in 4 young investors claim a complete understanding of how their portfolio is managed. Robo-advisors are an excellent tool for those just starting to invest, but wealthy investors require more attention and human connection. By participating and interacting with audiences online, advisors can extend their skills and services to new clients. America’s wealth is exchanging hands, and advisors aren’t meeting their new clients where they are. Gen X, Millennials, and Gen Z approach banking in their unique generational way. Before older clients pass their wealth on, advisors should establish new relationships with the next generation. There’s an opportunity to be found online if advisors access channels to connect with individuals who have no existing relationships with financial advisors. Younger generations are looking for advice, and advisors are in a position to become a trusted source now and moving forward.