The Next Generation of Investors

By Amy Kemp, Senior Analyst, Nasdaq Dorsey Wright

Run a Google search for "Millennials and investing" and you'll find enough literature to keep you reading for hours (maybe even days!). There is no shortage of data available from surveys, studies, and the like, all attempting to depict trends on investing behavior and perceptions of Millennials. Why does this generation merit your attention as a financial advisor? Well, according to data published by Goldman Sachs, "The Millennial generation is the largest in US history and as they reach their prime working and spending years, their impact on the economy is going to be huge." On the other hand, a survey from found that only 1-in-3 Millennials invest in the stock market (compared to about half of the population of Gen X'ers and Baby Boomers). The fact that this large population is also largely under-invested ultimately equates to opportunity for advisors today. There's only one problem: Millennials don't trust investment advisors.

Who are Millennials?

Before we discuss some potential solutions to this problem and ways you can better appeal to this population, let's first get an idea of "who" Millennials are. There are tons of resources available that help define this generation. Some of our favorites include - Goldman Sach's "Data Story: Millennials", this report from "Millennial Marketing", and for those interested in even more in-depth research topics regarding Millennials, you can visit Pew Research Center's dedicated "Millennial" topic page. Below are the points we found to be of particular interest:

  • There is some debate about the exact definition of age ranges for those categorized into the Millennial population, but generally speaking, it includes those born between 1980 and 2000. That means the oldest Millennials are nearing the end of their 30's, while the youngest Millennials are still getting used to having their driver's licenses.
  • They account for 25% of the US population (approximately 92 million people), making it the largest generation in the country's history.
  • Having grown up in a time of rapid change and innovation, Millennials have known an "always-on" digital world. They send a median of 50 texts per day, and have the highest number of Facebook friends (an average of 250).
  • Millennials value brands that enhance their lives, and are more likely to make purchases that support a cause, even if that means paying a premium.
  • They have been slower to marry, move out on their own, and make large purchases such as cars and houses, than generations before them.
  • Approximately 1-in-4 Millennials are parents.
  • 50% of the Millennial population consider themselves politically unaffiliated

Millennials and Investing:

Back in 2011, Barron's published an article titled "How to Keep the Kids" with points that remain very relevant today, especially as it pertains to the Millennial population and their investing tendencies (or lack thereof). Below is an excerpt from the article:

A mere 2% of children keep the money they've inherited with their parents' financial advisor, according to a PriceWaterhouseCoopers Global Private Banking/Wealth Management survey. Similarly, only 45% of wives keep their assets with the same financial advisor after the husband dies. The reason for this high attrition is simple: The advisor has no relationship with the client's family. "If your first introduction to the kids is: 'I'm sorry for your loss, my name is Phil,' that doesn't work," Krawcheck says.

To add insult to injury, an estimated $30 trillion in assets is expected to be passed from the Baby Boomer generation to Millennials in the coming years (source: So how can you best go about "keeping the kids?" Well, as is the case with any prospective client, the key to winning their business (and trust) is to first understand where they are and where they want to be, financially. Using the data that is available about Millennials' investing habits and sentiment, can help narrow your prospecting strategy. Of course, not every client or prospect that walks through your door between the age of 20 and 37 can automatically be categorized within these generational stereotypes, but we hope the thoughts below serve as a good starting point.

The Statistics: Only one-third of Millennials invest in stocks, and 60% have less than $10,000 saved for post-working years; yet 65% say they are "positive about their financial future." (source:

A Solution: Education, education, education.Perhaps this requires a discussion that feels more along the lines of financial planning instead of investment advising, but these days, advisors need to be able to bring both to the table. That doesn't necessarily mean you need to get your CFP designation or hire someone new to your staff. Instead, you could initiate this conversation with a few questions and visuals from some very basic growth calculators. Do they plan on purchasing a house? Is saving for their children's education a priority? Do they plan to retire at some point? Can they achieve these goals based on their current investment behaviors? Use the image below, or email this link to NPR's "How Savings Can Grow" calculator to impress upon them how little changes today can have a big impact in the future.

The Statistics: Millennials are most likely to be introduced to investing at work, thanks to 401(k) and other employer-supported retirement plans. At the same time, "four of ten say they don’t have enough spare income to squirrel away for the future" (source:

A Solution:If some of your current clients have kids that fall into this category, they may not have the money to open a trading or investment account; but they likely have access to some sort of retirement account through their job. To help establish a relationship that will hopefully grow over time, consider ranking their plan holdings for them pro bono. It will take you 5 minutes on the DWA platform. Save the ticker symbols to a portfolio and rank them based on Fund Score. You could also consider throwing them in a custom Relative Strength matrix to identify where the leadership lies. Consider doing this once a quarter, and encourage them to remain invested in the top ranking funds. Below is a sample matrix using Morningstar's 401(k) menu of funds.

As the Barron's article stated, "Once you've got their data, once you've set up the dashboard, once you're sending them a quarterly've got a client for life. Sure beats watching them walk out the door."

The image above illustrates an example Dorsey Wright Relative Strength Matrix. This is presented for example purposes only and does not represent a recommendation. Please see the disclosures for important information regarding relative strength.

The Statistics: Nearly half of Millennials say investing is "too risky" (source:

A Solution: Here's your chance to really shine! Managing risk is what you do. You know that market structures are cyclical, and understand the importance of positioning portfolios for wealth accumulation during bull markets, while focusing on wealth preservation during bear markets. Objective Market Indicators like the Dynamic Asset Level Investing (DALI) Tool, Bullish Percent Charts, the RS Matrix and Fund Scores/Technical Attributes all help you determine whether it’s time for offense or defense, while also keeping you invested in asset classes, sectors, and even individual securities that are in a position of leadership, driven by demand.

We have several client resources available to help facilitate the conversation around risk management.

The Statistics: Despite claiming to be risk averse, "Millennials will dive into stocks of companies they know a lot about"(source:

A Solution: Which stocks are these? Probably anything that tastes like, sounds like, or looks like social media and innovation. The FAANG names (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL)), of course, in addition to Snapchat (SNAP), Twitter (TWTR), PayPal (PYPL), Tesla (TSLA), Starbucks (SBUX), and anything else on this handy infographic. There are several directions you could potentially take this conversation, but perhaps an important investment lesson to get across is the difference that can exist between the company and its stock. Sometimes good companies make great investments, and sometimes they don't. Let's pick on two fan favorites: Facebook vs Snapchat. Their technical pictures could not be more different. FB is clearly driven by demand with a long term positive trend and consecutive buy signals, telling us that there are ultimately more buyers than sellers willing to sell shares of FB at this time. It's a perfect 5 for 5'er and is up about 47% year-to-date. Then there's SNAP. Selling pressure has driven the price down from its IPO level of $24 per share to $14 a share. That's a 45% haircut in just four months' time. All the while, the broad market is up more than 4% over the same time, making it a negative diverger, which is also reflected in its 0 for 5'er attribute rating.

We will leave you with a quote on this topic from Brandon Kreig, CEO of Stash, an app that aims to make investing more accessible and simplified. He said, “Millennials are everyone. They are Uber drivers. Engineers. Workers at BestBuy. People in the military. They want to invest, but many just don’t understand. Many have no idea you don’t have to be rich to invest. It’s about financial education. Young people don’t need to be scared of investing. They just have to start.”

Check out BUSINESS.NASDAQ.COM/TECH to learn more

Dorsey, Wright & Associates, LLC, a Nasdaq Company, is a registered investment advisory firm. Dorsey Wright receives licensing fees on assets invested in the PowerShares DWA Momentum Portfolio (PDP). Past performance does not guarantee future results. In all securities trading, there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown. Investors should have long-term financial objectives.

The relative strength (momentum) strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value. Relative Strength is a measure of price momentum based on historical price activity. Relative Strength is not predictive and there is no assurance that forecasts based on relative strength can be relied upon.

The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable (“information providers”). However, such information has not been verified by DWA or the information provider and DWA and the information providers make no representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein. DWA and the information provider accept no liability to the recipient whatsoever whether in contract, in tort, for negligence, or otherwise for any direct, indirect, consequential, or special loss of any kind arising out of the use of this document or its contents or of the recipient relying on any such recommendation or information (except insofar as any statutory liability cannot be excluded). Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice. Neither the information nor any opinion expressed shall constitute an offer to sell or a solicitation or an offer to buy any securities, commodities or exchange traded products. This document does not purport to be complete description of the securities or commodities, markets or developments to which reference is made.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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