Luxury Institute News

August 14, 2015

Millennials’ wealth management preferences differ from boomers: report

Luxury Daily
By: Kay Sorin
August 14, 2015

Millennial investors have different preferences compared to their baby boomer parents when it comes to wealth management, according to a new report by Luxury Institute.

While baby boomers and older generations prefer to work with full-service brokerage firms, wealthy millennials and members of Generation X are showing an increased preference for working with private advisors. Independent financial advisors can offer a more individual approach that is often appealing to younger investors who are accustomed to personalization.

“Independent financial advisors are able to do more things for their clients, because they are not working for a firm that has rules and regulations about what they can or can’t do,” said Milton Pedraza, CEO of Luxury Institute, New York. “The IFA is the fastest growing industry in wealth management.”

Different strokes
Luxury Institute surveyed investors earning at least $150,000 and found that at least 46 percent used some form of advisor to help them manage their finances. Among respondents aged 65 and over, this number rose to 59 percent.

Michael Kors affluent couple car
Wealthy millennials are inclined to prefer independent wealth managers

Respondents varied in their preferences for an independent wealth manager versus a full-service brokerage firm such as Morgan Stanley or Merrill Lynch. Interestingly, this preference strongly correlated with age.

“A full service firm doesn’t have a fiduciary relationship with the client, meaning that they are not legally obliged to serve the client’s interests only,” Mr. Pedraza said. “They can recommend an investment in which they will make a bigger commission.”

Millennials and members of Generation X and Y, defined as those 45 and younger, showed a significant preference for independent wealth managers compared to full-service brokerage firms. Thirty-eight percent chose to work with individual advisors while 27 percent preferred a big brokerage firm.

Michael Kors case
Millennials have access to more information and are well informed

Investors over 65 were much less likely to work with an independent advisor and only 28 percent reported doing so. They strongly preferred to go full-service with 56 percent using large firms to manage their wealth.

This difference between the generations is likely a result of their upbringing. Baby boomers were raised to expect to work with a big brokerage firm, while millennials may be more wary and distrustful after the recession of 2008.

Sotheby's London Property
Financial advisors can assist in major life decisions such as purchasing a home

Additionally, millennials have more information at hand, which allows them to be more selective with their advisors.

“Millennials are so much more informed that they depend less on a brokerage firm providing them with research,” Mr. Pedraza said. “Millennials don’t need as much because they are so informed.

“They know that very few financial advisors can outperform the market in the long term.”

One way in which individual advisors often distinguish themselves is by providing a more personal connection for clients. Luxury Institute found that expertise, trustworthiness and generosity were the most valued traits in financial advisors.

Affluent family
As millennials age they are in greater need of financial advice

More than numbers
Investors looking for both a personal relationship and a full-service brokerage firm may seek other solutions to find the ideal compromise. Ultra-affluent consumers often appreciate the relationship-building culture fostered at boutique wealth management firms, according to a report by the Luxury Institute.

The New York-based Rockefeller Wealth Management firm received the highest score in the report, followed by Atlanta-based Atlantic Trust Private Wealth Management and Convergent Wealth Advisors. As wealth management firms continue to repair their reputations following the financial crisis, prioritizing relationships over transactions will be important (see story).

Regardless of the size of a firm, relationships are often the deciding factor when it comes to choosing a financial advisor. To differentiate themselves from competitors, wealth management companies must make crucial changes that will only work if the alterations are part of the company’s core DNA, according to a speaker from the 2012 Forrester Customer Experience Forum.

It is no longer enough to just return calls and give a great customer experience, since clients at wealth management companies are not even thinking about those that do not require this. Instead, Morgan Stanley Smith Barney was forced to bolster its customer service in terms of technology, getting to know the customer and its consultants (see story).

Looking forward, it is essential for wealth management companies to take personal relationships into account in order to appeal to wealthy millennials.

“Millennials will be keen to stay with those who deliver and will dispense with those who don’t,” Mr. Pedraza said. “They will choose advisors based more on the client’s experience than on the client’s return.

“The baby boomers are kind of exiting the stage. Millennials will demand a far more objective and independent metric.

“Advisors need to be completely trustworthy and very responsive,” he said. “They need to go above and beyond to make the client feel special.”

 Source: http://www.luxurydaily.com/millennials-wealth-management-preferences-differ-from-boomers-report/

May 30, 2014

Affluents Don’t Want Texts from Luxury Brands

Far more affluents would opt in to luxury brand emails
E Marketer
May 30, 2014

Targeting affluents? Don’t expect to reach them through texts. In Q1 2014, Luxury Institute found that just 17% of US affluent internet users, those with an income of $150,000 or more, had signed up or were somewhat/very likely to opt in to messages from a luxury brand.

Even tech-savvy affluent millennials weren’t interested in luxury brand messages popping up on their phones: Just around one-quarter said they had or would be interested in receiving such communications, a percentage similar to Generation Xers.

Instead, emails may be the way into affluents’ digital inboxes, with 49% of respondents saying they had or were somewhat/very likely to opt in to receiving emails from a luxury brand.

While this wasn’t a majority activity among the entire group, the total percentage was skewed lower by boomers, as over half of millennials and Gen Xers were interested in receiving messages this way.

Either way, digital didn’t appear to play a major role in US affluent internet users’ research or purchase processes when buying luxury items.

Just 22% of respondents said they researched online and then purchased in-store, indicating they may not get inspiration for luxury purchases during digital browsing. Meanwhile, only 15% of respondents researched in-store and then bought online, possibly because they didn’t feel comfortable making expensive purchases digitally—or maybe they just wanted their luxury items instantly.

August 2013 research by Shullman Research Center found that online channels were where US affluent internet users—those with a household income of at least $250,000—felt least comfortable making purchases, with half saying they did not feel OK buying something via a smartphone, tablet or computer. Meanwhile, just 7% said the same about making a purchase in-store.

See article at: http://www.emarketer.com/Article/Affluents-Dont-Want-Texts-Luxury-Brands/1010867/1

 

May 23, 2014

60pc of affluent Baby Boomers inclined to use social media: report

By: Joe McCarthy
Luxury Daily
May 23, 2014

Generational distances regarding social media use are not as wide as commonly thought, according to a report from the Luxury Institute.

Eighty-five percent of millennials surveyed for the report said they were inclined to use social media, compared to 73 percent of Generation X’ers and 60 percent of Baby Boomers. As luddites become further marginalized, brands must adopt a marketing approach that prioritizes individuals over segments and personas.

“The surprising part for me is that Boomers, Gen X’ers and millennials are all consuming all of these media at some level,” said Milton Pedraza, CEO of The Luxury Institute, New York. “It’s not as if they’re getting left behind. These are all affluent people, and tech savvy.

“Life stage matters tremendously but because of the new age of data, analytics and one to one marketing, we can look beyond the segments to the individuals and market to them,” he said.

The Luxury Institute surveyed 1,200 consumers 21 and older with an annual household income of at least $150,000.

Less boundaries
The report aims to get marketers to reconsider media consumption in general. The dynamic of how consumers “consume” is messier than the laser-drawn segments of millennials, Gen X’ers and Baby Boomers suggests.

Age provides broad indications of consumer behavior, but individual behavior is more granular, rife with the unexpected.

Baby Boomers do watch more television, with respondents averaging seven hours per week, but millennials are also flipping through channels, with these respondents averaging four hours per week. About 70 percent of all segments surveyed watch previously recorded programs on DVR.

“Marketers need to go beyond stereotypes and propensities, and start doing real one-to-one marketing now,” Mr. Pedraza said in a press release. “The data and analytical firepower are there to build relationships, and wealthy consumers, especially millennials, demand it.”

“We have to look at individual needs, lifestyles and life stages and combine something that’s optimal for each person,” Mr. Pedraza said.

See full article with quotes from Milton Pedraza, CEO of Luxury Institute: http://www.luxurydaily.com/60pc-of-affluent-baby-boomers-inclined-to-use-social-media-report/

May 2, 2014

Consumer Spending Trends: What Drives Luxury Purchases

New survey finds generational differences in how wealthy shoppers make luxury purchases.

By: Donald Liebenson
Millionaire Corner
May 2, 2014

What becomes a luxury brand most? A new consumer spending trends survey finds that regardless of age, superior quality and craftsmanship are the two most essential elements of a luxury brand that wealthy shoppers consider.

The Luxury Institute surveyed U.S. consumers ages 21 and up with a minimum annual income of $150,000 about what they consider to be important in luxury brand purchases and the specific triggers that motivate their spending decisions.

Six-in-ten wealthy respondents also said they consider superior customer service and design as vital attributes to a luxury purchase.

The consumer spending trends survey found generational differences in what influences luxury purchase. Millennials put a high premium on the opinions of others. Nearly seven-in-ten (68 percent) of wealthy shoppers born after 1980 ask someone they know about their experiences with a luxury purchase before buying it. The becomes less important among Gen Xers (64 percent) and Baby Boomers (58 percent).

Millennials, who came of age during the recession, are more likely than previous generations to give greater consideration to a brand’s history, a product’s uniqueness, and investment value when it comes to evaluating luxury brands. They also grew up in the digital age of online discounts. Playing into the stereotype of their generation as entitled, the survey also found the wealthy Millennials “have developed expectations that luxury brands should show their appreciation for any purchases made by providing complimentary shipping and rewards programs.”

In addition to free shipping, wealthy shoppers of all ages agree that user-friendly return policies and lifetime guarantees are the two most potent features of luxury brands that enhance the luxury shopping experience and compel them to buy from a particular merchant.

There is little generational difference in how the wealthy make their high-end purchases, according to the consumer spending trends survey. Online shopping is no pervasive enough that Baby Boomers, Gen Xers and Millennials are all nearly equally as likely to have made their last luxury purchase online as in-store.

Brand websites are universally the most popular sources of information wealthy consumers use when preparing to make a luxury purchase. Three-in-ten most rely on online consumer reviews and friends and family, while 27 percent most rely on sales associates. More than three-fourths of wealthy Millennials (vs. 70 percent of Gen Xers and 67 percent of baby Boomers) say they are susceptible to being swayed by advertising. They are also much more open to receiving emails or text messages from luxury brands and sales representatives as well as using social media, mobile applications or other digital platforms to further engage with luxury brands.

Click the link to read the entire article: http://millionairecorner.com/Content_Free/Consumer-Spending-Trends-Luxury-Purchases.aspx

April 30, 2014

Millennials value heritage more than Gen X’ers: study

By: Joe McCarthy
Luxury Daily
April 29, 2014

A new report by the Luxury Institute found that millennials scrutinize investment value and heritage of purchases more than Generation X’ers and Baby Boomers.

The study also found that millennials regularly search for one-of-a-kind items as a way to signal status. While brands often treat “showrooming” as a threat to brand integrity, the research that accompanies the trend indicates that improved customer service and responsive multichannel efforts can turn the phenomenon into a benefit and a source for more revenue.

Millennials want the heritage of the brand, they respect history, and they see it as a validation of investment value,” said Milton Pedraza, CEO of The Luxury Institute, New York.

“They don’t have all the money in the world, they’re just starting out, so they want to make sure they’re buying appropriately,” he said.

“But they do have much higher expectations, so that’s a little bit of a paradox. They care far more deeply about certain aspects of a luxury brands.”

This study is the first in a series of three comparatives studies of millennials, Gen X’ers and Baby Boomers by The Luxury Institute.

Click the link to read the entire article: https://www.luxurydaily.com/millennials-value-heritage-more-than-gen-xers-study/