Millennials now comprise the largest living demographic group in the U.S. Thanks to innovation and advances in technology, this first generation of digital natives has enjoyed opportunities that were unimaginable a few decades ago. Their demand for transparency, relevance and authenticity in the way they interact with service providers has been the driver of unprecedented change across industries, including — and perhaps especially — financial services.

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The millennial cohort, which includes ages 22 to 38, has been diligent. They started saving for retirement at age 24 on average, significantly earlier than past generations, and their rate of saving is growing (see chart). Yet in spite of these advantages, they face far greater financial hurdles than their parents.

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An Economic Environment They Can’t Control

Millennials are better educated than prior generations and would therefore be expected to earn more in a growing economy. The problem is, economic growth is expected to decelerate for the next several years for a number of reasons, including impact of the COVID-19 pandemic on global GDP growth. Since 1926, the stock market’s average return has been around 8 percent after inflation. Expectations for future returns are lower, however. This outlook, combined with today’s low interest rate environment, is another factor that could make it harder for millennials to build a retirement nest egg. Add to that student loan debt of $33,000 on average for each millennial borrower and the likelihood of higher taxes in the future (to pay back $3 trillion in coronavirus stimulus and support an underfunded Social Security system), and it’s easy to see that accumulating wealth has become that much harder.

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Focusing on What They Can Control

Not surprisingly, a recent survey found that 73 percent of millennials are “not optimistic” about their financial future. Most millennials are aware of the challenges they face and want help. That’s good news for advisors.

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