The Last Untapped Market for Money Managers

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The Last Untapped Market for Money Managers

Most Americans aren’t investing, yet those who do are much more confident about their retirement. Sounds intuitive, but fewer than half (44%) of American respondents said they have any market-based investment holdings in BlackRock’s latest annual Investor Pulse survey of over 4,000 people in the US.

Moreover, only 56% of their respondents said they’ve started to save for retirement, yet those “with a retirement savings plan are more likely (78%) to have a higher level of overall well-being than those without one (52%)”.To assess this disparity, here are some highlights from the survey along with our takeaways at the end:

  • Sixty percent of US non-investor respondents said they don’t have enough money to start investing. More women (58%) than men (54%) agreed. Most interestingly, millennials were the least likely cohort to make this claim: millennials (55%), gen X (59%), and baby boomers (56%).

    Most (64%) also find information about investing difficult to understand. Millennials (63%) were most confused compared to baby boomers (55%) and gen X (59%). Same with women (65%) versus men (53%).
  • Almost half (47%) of US non-investors said they are too worried about their financial situation today to think about the future. Millennials (49%) were most likely to have this concern compared to baby boomers (32%) and gen X (46%). Men (40%) and women (41%) shared similar views. 

    Almost a third (31%) are also afraid of losing everything. Millennials (42%) were most likely to feel this way versus baby boomers (28%) and gen X (29%). Same with women (31%) over men (27%).
  • Over a third of US non-investors (34%) want to try out investing with a low money commitment. Millennials (35%) were most likely to share this belief compared to baby boomers (25%) and gen X (31%). Same with women (32%) versus men (28%).
  • Most US non-investors (74%) recognize their future outlook would be better if they started investing now. Millennials (72%) and gen X (73%) were most likely to feel this way versus baby boomers (57%). Women (68%) were less certain than men (71%).

    Over a third (39%) also said they’d feel better about their finances if they could better balance their needs today with their needs in the future. Millennials (45%) were most likely to have this feeling, followed by gen X (43%) and baby boomers (34%). Women (41%) and men (40%) were roughly in agreement.

Here’s what we make of these results:

#1 – As we’ve written in the past, women and millennials are underappreciated cohorts for financial advisors and represent large opportunities for client outreach. Women with a retirement plan said they had a higher well-being (76%) than those who do not (53%), but just half (52%) of American women have started saving for retirement. The thought of investing also stresses women out (64%) more than men (50%). Consequently, just 38% of American women invest in the financial markets and over half (55%) think investing is not for “people like me”.

As for millennials, they reported worrying about their finances more than other cohorts. Most (77%) feel there’s too many investment options to choose from and 59% don’t know where to go for retirement planning advice. Even still, most millennials (84%) also think their financial outlook would improve if they started investing. This sentiment from both millennials and women gives an opening to advisors to better educate them and act as their financial guide. 

With people living longer than ever, millennials have to understand that they need capital growth to meet near-term goals and last through their retirement. Starting sooner is of course better. This message is all the more important for women since they live longer than men and earn less.

#2 – On the downside for financial advisors, millennials and women were most likely to want to try investing with a low money commitment. The majority of both demographics also believe they do not have enough money to invest. This is partly why fintech startups and robo advisors have grown in popularity with their low-cost options, especially with younger investors.

Advisors can help overcome this competition by offering more approachable investment options to millennials/women, such as lower minimum investment requirements. This will help get their foot in the door. As they get more comfortable with the process and their earnings power grows, they will eventually move up the product/service chain and remain loyal as they do.

#3 – The majority of millennials and women understand that starting the investing process now will improve their future outlook. That’s the lever to pull to create a sense of urgency. They also recognize balancing near-term needs with future needs is important, more so than even their older or male counterparts. Wealth managers need to sell investing as a solution to help ease this tension.

Bottom line, millennials and women know investing will be beneficial. They just need educational and approachable guidance from wealth managers.