Certain generations stand out from the rest for the impact they made on society. For Baby Boomers born between 1946 and 1964, this could be high fertility rates, the proliferation of the female labour force, or even bell-bottom jeans. Regardless of their unique traits, one of their dominating traits has been the size of their asset portfolios. As they move into retirement, Boomers’ financial assets have been the focus of the investment industry. However, the spotlight is starting to shift away from them as Millennials (a.k.a. Generation Y, born between the 1980s and the 2000s) become increasingly prominent in society and begin to accumulate more wealth.

Millennials are a technologically advanced and interconnected generation for whom popularity is measured by the number of likes on Facebook or followers on Twitter. Although they may be best known so far for adding words such as “selfie” and “hashtag” to the English dictionary, they are a force to be reckoned with. When it comes to investing, financial institutions recognize that Millennials are the next big generational wave after the Boomers. It is inevitable that their assets will grow and eventually eclipse those of their predecessors.

Establishing a sustainable wealth management practice, therefore, requires an understanding of the characteristics and behaviours of this new generation, and the unique challenges and opportunities they present. We look at three different surveys to extract some of the current trends and recommend strategies that can help attract and retain Millennials as clients. These surveys were conducted by UBS, Merrill Lynch Wealth Management and Transamerica Center.

1. Tackling the Skepticism

According to UBS, Millennials have witnessed a complex geopolitical environment and a once-in-a-generation financial crisis early in their lives. This makes them much more skeptical than the Baby Boomers, but it also makes them better savers. Seventy per cent of Millennials began saving at an average age of 22, versus an average age of 35 for Boomers, as indicated by the Transamerica survey. Much of their savings do not seem to find a good home, however, since Millennials appear to be significantly more conservative and have higher cash allocations.

Targeting Millennials presents a unique opportunity for advisors to increase their assets under management. Not only are their current cash allocations high relative to their risk tolerance, they are also at an early stage of wealth accumulation and there is a lot more to come. Attracting Millennials as clients now, and retaining them, means a continuous growth of assets under management for the next few decades. But doing this requires creativity to counter their ingrained skepticism. Presenting the virtues of long-term investing is no longer sufficient for this crowd. The UBS survey indicates that Millennials have less faith in long-term investing and are least likely to invest new money, which adds further to cash allocations. Only 12 percent of the Millennials said they would invest immediately in the equity markets as compared to 33 percent of other generations.

One way to counter Millennials’ skepticism is to synchronize investment strategies with their mind- set. According to Merrill Lynch, indexing strategies have gained more popularity with this generation, so exchange-traded funds may be an easy and intuitive way to bring them on board. But that may still not be sufficient to win over new clients. Interestingly, 72 percent of the respondents indicated that they are “self-directed” in their investing, with 41 percent reporting not working with a financial advisor of any kind. To capture their attention, advisors need to go beyond traditional financial advice and asset allocation, which brings us to the second recommendation.

2. Creating a Unique Value Proposition

Millennials’ skepticism is not reserved just for the markets; their mistrust also extends to advisors as service providers. They see advisors as sales- men and question whether paying for financial advice is really worth it, as reported in the Merrill Lynch survey. Only 19 percent of Millennials thought that advisors have their best interest in mind, while 40 percent disagreed that advisors look after their clients’ interest. When thinking of financial advisors, this new breed of investors actually considers financial advice as a basic service, and they tend to seek out a distinct value proposition in their advisors.

This value proposition could take any form and presents an opportunity for advisors to carve out their niche. It could mean providing access to an exclusive network, an opportunity to expand relationships, access to other services such as financing, insurance strategies, or simply being a behaviour coach and helping clients realize their own ambitions. Whatever the value added is, advisors need to clearly articulate it and appeal to Millennials at a deeper level.

Success for Millennials is not just about money; they look beyond higher rates of returns. The UBS survey indicates that 83 percent of Millennials are not trying to beat the market, and 24 percent of them measure success by their performance relative to their goals. Factors that Millennials consider to be hallmarks of success include having a happy family, meaningful relationships, financial freedom, and living a full life with a wide variety of experiences.

Nevertheless, advisors do rank among the top four sources Millennials would turn to for financial advice. But they may ask a lot more questions than any of their predecessors, and this again presents an opportunity for advisors to stand out and attract this crowd. They can use technology to their advantage and relay their message to a larger audience more efficiently, which leads us to our final recommendation.

3. Harnessing Digitalization

Surprisingly, despite their technological sophistication, Millennials are no more likely than other generations to rely exclusively on the Internet for financial advice. Rather, they value face-to-face advice from the people they trust. But that does not mean advisors can ignore social media or avoid having a web presence altogether. These could be very powerful channels to reach the Millennials and enable them to do their research prior to or following face-to-face meetings to seal the deal.

Advisors can also use the social media and their existing client base to reach out to the next cohort of investors. A strong online presence could help cultivate a large number of prospective clients and create demand for specialized financial services. Some may even argue that history will remember the Millennials as the generation of the social networks. Only time will tell if that argument actually holds true. In any case, it is inevitable that the Millennials will play an instrumental role in forming the future of wealth management.