Affluent Millennials, Home Tech and Chilling Lessons from Wealth Management Industry

J.D. Power survey suggests wealth-management firms are ignoring ’emerging affluent Millennials’, causing the generation to move to online investment vehicles. Custom home-technology pros be warned.


Wealthy Millennials flee their full-service financial advisors at alarming rates, as wealth-management firms ignore their unique needs. Sound familiar, home-tech industry?

In many ways, the wealth-management industry is a lot like the custom integration (CEDIA) industry. Both tend to focus on reliable, high-worth customers who consistently return (with their money) to their trusted advisors.

And neither seriously addresses the unique demands of millennials, the generation that just might be the most radically different from its parents’ generation.

Let me take that back. Maybe we’re “seriously addressing” this generation, but not with the radically different means it will require. And where will that leave us?

Forgive the extended analogy here, but what’s happening in the wealth-management sector is eerily similar to what is or what will happen in the custom home technology business.

I don’t even have to draw the analogy but I will, after delving into the wealth-management industry, and how they’re faring with “emerging affluent investors,” i.e., Millennials with $100,000 in investable assets.

Millennials Flee Full-Service Investment Firms, Like They Will Custom Integrators

According to a recent J.D. Power survey, 48% of these young investors who are currently working with a full-service investment firm say they “probably will” or “definitely will” leave their current firm within 12 months, compared to a piddling 8% of potential defectors among all other generations of investors.

Emerging affluent investors comprise only 8% of the overall available investable asset pool, so no big deal right? Wrong!

If, in fact, half of this pool abandons their current investment firm, they will take more than half (55%) of all departing assets with them.

This customer base might be a smallest of the wealth-management industry, but now it is also the most unsettling. Of course, it will only get worse as the reliable older-gen customers fade away.

There’s a term in financial circles called “money in motion,” when some defining moment precipitates a movement of money – a divorce, sale of a business, inheritance, collapse of some financial institution – and that’s the time to swoop in to claim the cash.

“Wealth managers have been slow to focus on Millennials because they don’t yet have the assets Boomers do.”

— Mike Foy, J.D. Power

But millennials need no defining moment. Their money is constantly in motion, just like they are, flitting from rental to rental, hopping from brick-and-mortar to online, and switching vendor “loyalties” on a whim.

“Wealth managers have been slow to focus on Millennials because they don’t yet have the assets Boomers do,” says Mike Foy, director of the wealth management practice at J.D. Power, “but when looking at potential money in motion—even in the short term—the picture looks quite different.”

In the “olden days,” investors would simply jump from one advisor to another, leaving the industry intact. It was a zero-sum game.

These days, though, young investors not only have more options, they have the will to bounce around from platform to platform, human or otherwise.

“With the emergence of robo-advisors and self-directed platforms,” Foy says, “investors have more options than ever, both within and outside the traditional full-service channel.”

In other words, the traditional wealth-management business will have a net loss of customers – a huge loss – if they don’t do something to court and keep the emerging affluents.

Exactly 25% of full-service Millennial investors have either tried, or are actively using, a robo-advisor platform, according to J.D. Power, and 28% of them rate their satisfaction with this platform higher than for their full-service firm.

Also, more than one-third (34%) have a secondary self-directed account, “suggesting a flexibility and openness to a variety of service models not exhibited by investors in other generational groups,” the researchers say.

According to the study, 54% of Millennials who use full-service investment advisors have a “documented financial plan.”

But those plans tend to address retirement, as they would for older clients who are leaving the work force, without considering the specific needs of younger investors.

This class isn’t necessarily concerned about capital preservation or estate planning like their elders.

“[T]hese investors are much less likely to feel they [advisors] are addressing other financial goals that are a higher priority for Millennials,” such as a major purchase or higher education, according to the research company.

Loss of Potential Brand Champions

It gets worse. Boomers aren't the ones who go online to kvell over their service providers to friends, family, and vast social-media followers. Referrals in the older generations go through word of mouth – one plodding friend at a time.

Millennials, on the other hand, spread good and bad reviews like wildfires; their friends and followers are nimble enough and adventurous enough to heed the reviews.

“The firms that are able to create loyalty among Millennial clients today can expect significant ongoing rewards,” J.D. Power suggests. Among those clients identified as highly likely to recommend, Millennials made more positive recommendations during the past 12 months (8.1 per client) than did Boomers (3.3 per client) and Gen X (3.7 per client) combined.

“But advisors and firms need to actively cultivate this referral source,” J.D. Power advises. “Millennials indicated they would be more likely to provide referrals if their advisor asked (40%) or they were incentivized to do so (39%).

Parallels to Custom Home Technology

I hate to insult readers by explaining the parallels, but here it is:

There will always be the high-end consumer who demands full service, preferably from an “advisor” they have used for ages. And many younger customers will “age into” that bracket after spending a couple decades tooling around on the Web, and earning enough money to relegate home-technology decisions to “homeowner representatives.”

Millennials thrive on no-touch service. They want the type of convenience you get from 

But even then, it won’t be the same. They won’t use your services for one home, and then automatically enlist you for their next estate.

They’re nimble. They take cues from friends, family and online reviews.

In any case, “great service” won’t be what garners referrals and repeat business. Convenience will.

Millennials thrive on no-touch service. They want the type of convenience you get from Read some reviews, select some products, press the “one-touch buy” button, and (soon) have it delivered to the secure drop-off zone by the garage.

Or … have the custom installer sneak in while you’re away and get the business done. You will send proposals online, bill them online, submit change orders online, wrap up all business online, and then ask for the referral online, or with a card attached to a case of the customer’s favorite wine.

Now is the Time to Court Millennials

Your competitor today isn’t the integrator next door. It’s the non-integrator. Like Millennials are fleeing traditional wealth managers, they will flee our channel if we don’t court them and keep them, starting now.

We need to adapt our mentality, our systems, our processes to keep up with the Millennials and their offspring. Or we will cede their money-in-motion to more responsive providers.

Audio Advice, traditionally a high-end custom integrator, began this transition two years ago (time for an update, guys). The rest of the industry doesn’t need to follow their path exactly, but certainly must find ways to attract “emerging affluent” customers, keep them, and generate referrals from them.

It’s not about product or price or hand-holding. They don’t want to hold hands. They want a provider that understands their needs today, and will treat them like the future gods they will become.

Have you thrown a Millennial Mixer lately? 

About the Author

Julie Jacobson
Julie Jacobson:

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson