TD Ameritrade Institutional Survey Finds Millionaires in the Making are a Promising - Yet Uncrowded

Investor Survey Explores How Up-and-Coming Millennials View Financial Advisors and How They Plan to Navigate the Road to Rich

Millennials who are of modest means, but on the right path to greater wealth, represent a largely untapped opportunity for registered investment advisors (“RIAs”) looking to add promising new clients, according to TD Ameritrade’s Millionaires in the Making survey.

High potential millennials represent an attractive group of prospective RIA clients, more so than their already-affluent peers, because they are entering peak earning years and accumulating assets, yet they are largely overlooked by most financial firms. The potentially wealthy also are more likely to hire their own advisor than their wealthy peers, who typically already have an advisor and aren’t looking to switch.

Millennials, also known as “Generation Y,” are typically defined as the 80 million Americans born in the 1980s and 1990s. Attracting this new generation may be critical to the investment advisor business, where fewer than 10 percent of clients are under 40 and half are over 60.1 Moreover, millennials are expected to inherit trillions of dollars2 from the baby boomers who have long sustained RIAs.

“Advisors can’t wait until this next generation is wealthy before they start rolling out the red carpet. This transition is happening now,” said Tom Nally, president, TD Ameritrade Institutional3. “Our latest research shows RIAs would be well-served pursuing young investors who may not have great wealth yet, but who have high earnings potential and are eager to work with a professional advisor.”

The Millionaires in the Making Survey taps into the mindset of millennials and how they intend to map out their financial futures. While millennials are typically painted with a broad brush, TD Ameritrade took a closer look at how different levels of current wealth and annual income affect views on financial management and retirement planning. The survey divided millennials into three groups:

High Net Worth Millennials have more than $500,000 to invest and are more likely to hire an advisor. Odds are they’ll retain their family’s advisor. Wealthy millennials are more inclined to seek an advisor who is a contemporary, rather than someone older, so attracting this group may require hiring young advisors. Nearly half of this group are women, highlighting the growing need for female-friendly practices.

Potential High Net Worth Millennials have less than $500,000 to invest but earn more than $150,000 a year. These investors aren’t rich, but they’re building wealth and have prospects, like inheritance, that put them on an upward trajectory. This group is mostly overlooked by financial firms and may be inclined to hire their own advisor, creating a possible opportunity for RIAs. More women fell into this category, 62 percent, than men.

Mass-Affluent Millennials earn less than $150,000 and have less than $500,000 to invest. This group is worried about outliving their savings, meeting healthcare costs and having to work longer. Mass affluent millennials are less likely to hire an advisor, seeking financial guidance instead from family and friends.

Below are some key findings from the survey:

Millennial Views on Advisors

Current wealth impacts whether an investor keeps or fires their family’s advisor. Among high-potential millennials with an advisor, 55 percent hired their own advisor while just 29 percent plan to keep the incumbent family advisor. By comparison, 63 percent of wealthy millennials with an advisor said they kept their family’s advisor and had no plans to change. While previous research showed a higher percentage of younger investors were willing to leave their family’s advisor, these latest findings suggest advisors may be doing a better job engaging their clients’ children. That said, intergenerational transition is an evolving trend and should be watched closely as next gen investors continue to build wealth and consider hiring an advisor.
Wealthy millennials are more likely to use an advisor than their high potential peers: 65 percent versus 33 percent. However, nearly 70 percent of high-potential millennials want an advisor to help manage their finances.
Millennials have differing views on how old their advisor should be. The majority of high-potential millennials seek out an advisor who is older, while high net worth millennials showed a stronger preference for advisors their own age.
Wealthy millennials want many communications options. High net worth millennials favor a range communications channels with their advisors, from email and phone to in-person meetings and social media. High-potential and mass affluent millennials prefer email by a wide margin. Whatever the channel, millennials expect advisors to be accessible and immediately responsive.

Millennial Money Mindset

The definition of “financial success” varies. For wealthy millennials, success means not depending on a job for income, having enough to indulge in luxury items and setting aside money for retirement and education. High potential and mass affluent millennials are more concerned with having enough stashed away for a “comfortable” retirement.
Less-wealthy millennials are more optimistic about reaching their goals than wealthier peers. Nearly two-thirds of potentially wealthy millennials were optimistic about their financial prospects, compared with half of the already-wealthy. Wealthy millennials were more likely to be pessimistic about achieving their goals than the potentials: 26 percent versus 5 percent.
Hard work and smart investments are top factors in achieving financial success. When it comes to how they can acquire wealth, all millennials rate “making smart investments” and “hard work” as keys. The mass affluent and high-potential said being frugal is a top factor, while high net worth millennials cited family connections and owning a business.
Less-wealthy millennials expect to work longer and need more retirement savings. The potentially wealthy expect to work longer, with an average retirement target age of 60.1 years, compared with 56.8 years among already-wealthy peers. Potentials anticipate needing to save more before they can retire: $5 million versus $4.5 million among the already-wealthy.
Top retirement concerns are consistent among the millennial groups. Millennials worry about outliving their savings, needing to work longer and meeting health care expenses. High net worth millennials were less worried, but are mindful of the cost of caring for an elderly parent or relative.
Inheritance expectations differ slightly among millennials. Nearly one in five of the potentially wealthy expect to inherit $100,000 or more. While nearly two out of five high net worth millennials said they expect to inherit $100,000 or more.

For a more highlights and a detailed analysis of the Millionaires in the Making Survey, click here.

About the SurveyResults of the TD Ameritrade Millionaires in the Making Study are based on a survey conducted by The Pert Group on behalf of TD Ameritrade, Inc. Five-hundred and thirty-six investors between the ages of 18 and 39 participated in a telephone survey from January 15 – February 28, 2014, in which they were asked to share their views on brands in the financial services industry. Another 273 investors 40 years and older were surveyed for comparative purposes. The margin of error in this survey is ±5%. This means that in just over one case out of 20, survey results based on the 809 total respondents will differ by no more than 5 percentage points in either direction from what would be obtained by seeking the opinions of all investors within an age group. The Pert Group and TD Ameritrade, Inc., are separate, unaffiliated companies and not responsible for each other's products and services.

About TD Ameritrade InstitutionalTD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to more than 4,500 fee-based, independent registered investment advisors and their clients. Our advanced technology platform, coupled with personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

About TD Ameritrade Holding CorporationMillions of investors and independent registered investment advisors turn to TD Ameritrade’s (NYSE: AMTD) technology, people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how - bringing Wall Street to Main Street for more than 39 years. An official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams, as well as an official sponsor of the National Football League for the 2014, 2015 and 2016 seasons, TD Ameritrade has time and again been recognized as a leader in investment services. Visit TD Ameritrade's newsroom or amtd.com for more information.

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1 Cerulli Associates, the Cerulli Report, Advisor Metrics 2013, page 124.2 Advent Software, Three Ways to Reach the Next Generation of Investors, November 2013.3 TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

Source: TD Ameritrade Holding Corporation

TD AmeritradeJoseph Giannone, 201-369-8705Communications & Public AffairsJoseph.Giannone@tdameritrade.com

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