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Generation Y: The Untapped Market for Financial Advisors

Aug. 11, 2014 (Des Moines, Iowa)—As Millennials become more established in their careers, they are generally not on the radar of most financial advisors, reveals new research from the Principal Financial Group®. According to The Principal Financial Well-Being IndexSM: Advisors, a nationwide study of 614 financial advisors conducted online by Harris Poll for the Principal Financial Group in the second quarter of 2014, only 18 percent of financial advisors surveyed are targeting clients in Generation Y, and 57 percent of advisors prefer new clients with assets of more than $250,000.

The Principal Financial Well-Being Index: Advisors surveyed financial advisors nationwide including independent broker/dealers, wire house and regional brokerage firms, insurance agencies, independent wealth management firms, banks and independent asset management firms. The Index is part of a series of quarterly studies commissioned by The Principal Knowledge Center examining the financial well-being of American workers, business owners and advisor opinions and practice management.

According to the Index, at least three out of five financial advisors surveyed are targeting Baby Boomers (64 percent), affluent/high net worth individuals (64 percent), or business owners (62 percent). In fact, only 30 percent of American workers overall work with a financial advisor [1].

"This research illustrates the enormous opportunity for up-and-coming advisors to build relationships with underserved Millennials, who are in a growing phase of their careers and income potential," said Tim Minard, Senior Vice President of Distribution at The Principal.

So what prevents Millennials and other workers from seeking the help of a financial advisor? The study found that 29 percent of advisors surveyed report that fees and costs are the biggest barrier, followed by fear (16 percent) and people thinking they can do it on their own (10 percent).

Many of these financial advisors reported that clients tend to live beyond their means (22 percent), don't save enough (15 percent) and do not start to save early enough in their careers (11 percent). The majority of advisors (52 percent) indicate that no more than one in four of their clients begin saving early enough in their career to actually achieve the recommended level of retirement savings.

"One of the biggest challenges advisors face is helping clients try to catch up when they didn't start saving for retirement in the early years of their careers," Minard said. "Financial professionals are able to easily demonstrate to clients the power of early savings and the impact it has on their retirement nest egg."

The State of Financial Advisors

Financial advisors are showing continued confidence in their physical and fiscal health. Over three-quarters of advisors rated themselves as healthy or very healthy when it comes to their overall financial health (80 percent), physical health (77 percent) and the health of their business (83 percent, up from 78 percent last year).

However, advisors are still dealing with many fears in the economy: respondents fear market declines (57 percent) and a worsening economy (51 percent) will negatively impact their business in 2014. These advisors’ greatest pain point is dealing with compliance and regulatory issues (46 percent), followed by coping with misinformation (38 percent, up from 31 percent last year) and clients’ fears and emotions (38 percent). Additionally, many advisors surveyed reported that they are kept up at night worrying about not having enough time to get work done (28 percent), increased regulatory burdens (20 percent) and market performance (14 percent).

"As with employees, we are happy to see that financial advisors are equally focused on their financial and physical well-being. While regulations, market performance and economic outlook continue to be concerns, financial advisors are making significant strides to handle these issues for their clients and their businesses," added Minard.

Other key findings include

  • Client Preparedness: While 61 percent of advisors surveyed feel clients are in good shape when it comes to planning for how they will turn their retirement savings into income in retirement, only one in five of these advisors (21 percent) rate their clients highly in being ready to deal financially with becoming disabled and unable to work for a living.
  • Social Media: Fifty percent of financial advisors surveyed are utilizing social media in some way, including: to communicate with existing clients (25 percent), deepen relationships with existing clients (25 percent) and to help find new clients (23 percent). Less experienced advisors (between two and ten years of experience) are more likely to use social media primarily to find new clients (46 percent) than their more seasoned counterparts (20 percent).
  • Biggest Competition: Advisors surveyed found that their biggest competition is not other advisors, but their customers’ fears which result in lack of financial action (34 percent). Nonetheless, these advisors say 37 percent of new clients, on average, do come to them due to dissatisfaction with their previous financial professional. Only 4 percent of advisors are threatened by online investment advice providers.
  • Clients’ Top Blunders: Advisors interviewed say clients most often mess up by living beyond their means (22 percent), not saving enough (15 percent), or not starting to save for retirement early in their careers (11 percent).

For more research, analysis and insights, visit The Principal Knowledge Center and connect with us on Twitter.

Survey Methodology

This Principal Financial Well-Being IndexSM: Advisors was conducted online within the United States by Harris Poll on behalf of the Principal Financial Group® between May 14 and May 28, 2014 among 614 financial advisors. This study is used to identify and track changes in the financial advisor community. Participants to this survey consisted of producing financial advisors with a minimum of two years of experience and a personal income of $75,000 or more. A full methodology is available at www.principal.com/wellbeing.

About Nielsen and The Harris Poll

On February 3, 2014, Nielsen acquired Harris Interactive and The Harris Poll. Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA and Diemen, the Netherlands. For more information, visit www.nielsen.com.

About the Principal Financial Group

The Principal Financial Group® (The Principal®)[2] is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $517.9 billion in assets under management[3] and serves some 19.4 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

[1]
According to the 2nd Quarter 2014 Principal Financial Well-Being Index
[2]
"The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
[3]
As of June 30, 2014

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