Why Millennial Investors Would Choose Safety Over Performance

A recent survey by Natixis Investment Managers delves into the financial wants and needs of millennials.


Bigstock photo

Despite a tumultuous 2022, millennials remain optimistic — if cautious.

A recent survey by Natixis Investment Managers found among other things that millennials are open to financial advice and largely risk averse. The survey was conducted in March and April 2023 and questioned 220 millennials ranging in age from 25 to 42.

Natixis found that despite the S&P 500’s 20 percent decline in 2022, millennials expect returns of over 9 percent in 2023 and 15.6 percent over the long term. Nevertheless, many of them remain cautious with their investments.

According to the report, about 4 in 5 millennials would choose safety over performance. Eighty-two percent said that 2022 was a reminder that stocks could go down, and more than half said that market volatility had kept them awake at night.

This is not without reason, Dave Goodsell, executive director at the Natixis Center for Investor Insight, said in an email.

“Millennials saw their parents go through the financial struggles of the tech bubble. They experienced firsthand the challenges of the Global Financial Crisis as they were beginning to enter the workforce as the world was thrown into chaos,” he said. “They just went through the pandemic and many felt the financial impact of the economic upheaval. They are worried that social security benefits will be reduced by the time they retire. And they feel like more and more of the responsibility to fund retirement is landing on their shoulders. It’s likely they are cautious because they want to be sure they get it right.

Many millennials prefer index funds. Seventy-three percent believe them to be less risky; 81 percent said that they’re a way to minimize losses; and 80 percent said that they’re a way to access the best market opportunities.

Advisors provide an array of services, and millennials understand this. The majority (61 percent) said they were most interested in financial planning from their advisor, while 55 percent said they were most interested in retirement planning assistance. Thirty-nine percent said they wanted a financial advisor who understood their unique financial situation.

They also want and need professional financial help. Sixty-four percent of millennials surveyed by Natixis said that they need advice, and while a majority claimed to understand bonds — 72 percent used them in their portfolio — only 3 percent were able to correctly answer a question about the relationship between bonds and interest rates.

“[Millennials] want personal advice, particularly as they are entering a more complicated time in life with kids, houses, and longer-range plans. In fact, our research shows that millennials trust their financial advisor more than any other source for investment decision-making — even more than themselves — and are more likely than any other age group to say they need professional advice,” Goodsell said.

The millennial generation remains a key, but underserved demographic for most advisors. According to research and consulting firm Cerulli Associates, millennials are expected to inherit $27.4 trillion in the wealth transfer that is projected to take place over the next 25 years. But according to research by Fidelity Investments, only one in five advisors has an asset-weighted client age under the age of 60.

Goodsell believes that in order to best serve millennials advisors need to be well-versed in financial planning.

“It really comes down to the financial plan. They are looking for a more holistic relationship with a financial professional. Investments are likely to be the means to an end, not just a singular pursuit. Advisors need to be engaged in this way to earn their loyalty,” he said. Recent research by Schroders, a London-based asset manager, found that retirees with a financial plan had on average nearly double the monthly income of those without a financial plan.

Related Articles