ValueWalk’s interview with Kathy Dordick, a Senior Consultant at Spectrem Group. In this interview, Kathy discusses her and her company’s background, Spectrem’s High-income Millennials survey, two-thirds of millennials have education debt, the different wealth levels of Millennials, homeownership trends, the impact of the economic recession of 2008 on investing opinions, the idea of success and the American Dream, and balancing leisure with long term goals.
Can you tell us about your background?
I spent many years as a financial advisor, then I transitioned into institutional research. From there I spent 4 years working in senior care and senior living. I have always felt that understanding a prospect and their opinions and needs is the greatest asset an advisor can have when growing their practice, which is what drew me to Spectrem Group many years ago.
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What about your company?
Spectrem Group has been providing a voice to wealthy investors in the financial industry for 30 years. We provide unique insights and consulting with a wide variety of financial firms, with the goal of providing actionable information and recommendations that can be used when working with clients and prospects.
Can you tell us about your survey on high-income millennials?
We surveyed 443 High-income Millennials. Most of our studies look at net worth for qualification purposes but we wanted to gain insights into high-income regarding Millennials because their net worth is not likely to be as high as older age segments.
Why did you decide to only survey wealthy millennials?
High-income Millennials are ideal prospective clients for an advisor because they are in the wealth accumulation phase of their life, with a significant upside to continuing to add to their investments.
You use $150,000 as wealthy for married but many of these people probably live in expensive metro areas to be able to earn those high salaries - i think its possible someone making $150,000 in LA probably has less left over money than someone in Iowa earning half of that - what are your thoughts on this?
That is absolutely a possibility, which is why we allow for our data to be analyzed and filtered a number of different ways, including by geography.
Millennials are usually associated with student debt, how does that tie in here?
Our research found that two-thirds (66%) of survey participants have education related debt, with two-thirds of that debt coming from their undergraduate degree costs. Fifty-five percent of participants also indicated that they agree or strongly agree that student loan debt prevents them from contributing the amount they desire to a 401(k) plan or other retirement program.
How do high-income millennials differ from middle income or poorer millennials?
Millennials that have a higher level of wealth are more likely to prioritize paying off student loans than those Millennials with a lower level of wealth. Higher wealth level Millennials are also more likely to have found their advisor through an advertisement, publication or website. Those high-income Millennials with over $2 million in net worth trust Amazon more than their financial provider.
Do they own homes at the same levels?
Two thirds of high income millennials own a principal residence and 23% own a vacation home or a second home. This is in comparison to 82% of Gen X owning a primary residence, 92% of Baby Boomers and 91% of WWII investors owning a primary residence. However, Millennials are more likely to own a second home or vacation home than all the other age segments.
How good are high-income millennials at saving money?
Many high-income Millennials feel they are not saving at the level they would desire. In contrast, they also prioritize being able to afford leisure activities, as they consider that as a definition of success.
Did living through the financial crisis impact the attitudes of high-income millennials?
We asked participants how much the economic recession of 2008 impacted their opinions of investing on a 0-100 scale, with 0 not impacting them at all and 100 completely impacting them. Overall the score was 47.92, with the youngest high income Millennials indicating the highest impact at 53.13 and those 30-34 years old indicating the least amount of impact at 44.67.
What was the most surprising finding of your study?
There were a few very interesting findings, both around the idea of success and the American Dream. High-income Millennials are more likely to define success as being able to afford the leisure activities they want to pursue than having a family. Similarly, high-income Millennials view the American Dream as an equal opportunity for all, where older age segments defined the American Dream as owning a home or future generations having a better economic life than current generations.
Final thoughts on the matter?
Financial professionals need to be able to adjust and adapt their approach with high-income Millennial investors, who have a desire to balance leisure with long term goals. Nearly half of these investors already have a financial advisor, typically found through referrals but this age segment is also more likely to find an advisor through an advertisement or other media source. High-income Millennials are looking for financial planning assistance from their financial advisor.