Shell-shocked by market crises, Gen Y holds onto cash, doesn't use advisers, survey says.
The trauma of the financial crisis is still fresh in the minds of the youngest investors and that makes them hold tight to their cash and dubious about long-term investing.
Many millennials, which UBS defines as being 21 to 36, are as conservative as their grandparents' generation, which experienced the Great Depression, according to a recent UBS survey.
“Millennials are the most worried of all generations,” UBS' report said. “Investors of all generations are most likely to have a moderate risk tolerance. But millennials and World War II generation investors are more likely to describe themselves as truly conservative.”
The survey, which took responses from 4,165 U.S. investors including 1,069 millennials, found that the youngest generation had 52% of its assets in cash, compared with 23% for the other generations. Even older millennials who had at least $100,000 in assets had 42%.
“Clearly this allocation is not just based on cash needs, but reflects wariness about financial markets,” the report said.
The survey results suggested that financial advisers have some work to do.
Only 14% of millennial respondents said that they had consulted a financial adviser on important financial decisions. Most looked to their spouse or partner or parents.
“In seeking out a new advice source, they most value experience, trusting the person, and recommendations from friends and family,” the survey said. “Millennials actually worry more than other generations about getting good advice to help reach their financial goals and knowing if they can trust the advice they receive.”
Only 28% of the millennials surveyed said that long-term investing was key to achieving success, compared with 52% of respondents in other generations. More important, millennial respondents said, was working hard, saving, remembering what is important in life and getting a good education. Paying off debt, increasing savings and buying real estate were the first actions millennials said they would take before investing any additional money they were given.
“Millennials' views on how to achieve success help illuminate their mindsets toward long-term investing,” UBS reported. “With millennials having less faith in long-term investing, they plan to work harder and save more to reach their goals.”
Advisers have a long way to go to win the trust — and the assets — of these most wary investors.
“In seeking out a new advice source, they most value experience, trusting the person, and recommendations from friends and family,” the survey said. “Millennials actually worry more than other generations about getting good advice to help reach their financial goals and knowing if they can trust the advice they receive.”
