In quest for Millennials, financial firms try to 'crack the code'

To get Millennials excited about investing, Wall Street is following their wish lists: It's offering socially conscious "Clean and Green" funds, apps that let them buy stock with spare change, robot-driven portfolios and chatty, bite-size articles on handling money.

Why all the attention on Millennials' investing habits, or lack of them?

Because this group of digitally savvy people in their 20s to mid-30s is entering their prime earning years. And as America’s biggest generation, they represent a financial bonanza for investment companies - with a global net worth that could climb as high as $24 trillion by 2020, according to consulting firm Deloitte.

That’s a lot of future cash available to plow into markets.

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Wall Street is targeting investors like Sydney Teng, 24, a 2015 college graduate just starting her career. She is saving for retirement using a 401(k) plan offered by her employer, Evergreen Health Care in Baltimore. She’s setting aside 6% of her roughly $50,000 salary and understands saving for retirement "is a long-term game."

Teng invests in a target-date fund, which automatically determines her mix of investments based on her retirement in 2060. These popular funds start out aggressively with sizable stock holdings, but get more conservative as retirement approaches. Teng’s 401(k) is now 90% stocks. Still, she admits she is not totally comfortable with them.

"Part of me is a little bit afraid," Teng said. "I don’t like to lose money. My current account balance is chump change in the scheme of things, but I don’t want to part with it."

Getting Millennials to start investing isn’t easy, even though most (85%) say saving for retirement is an "important part" of becoming a "financial adult," according to a Wells Fargo study.

"Every financial planner, investment adviser and financial-services company is asking: ‘How do we crack the code needed to get the next generation of investors,’" said Avi Lele, CEO of Stockpile, a firm that caters to young investors and pioneered the use of gift cards to buy stocks with as little as $25.

The market crash in 2008 left many distrustful of Wall Street. "Skepticism appears to exist in this generation's very DNA," a survey titled Millennials and Money by Merrill Lynch's Private Banking and Investment Group concluded.

What’s more, this generation gets tripped up by financial jargon. And they’re not necessarily flush with cash, either, as 34% of Millennials say they have student loan debt to pay off, according to a Wells Fargo study. They’re also not crazy about losing money if stock prices fall. In an Ameriprise Financial survey, 63% of Millennials said it would be "disturbing" to invest in stocks and then see the "value drop considerably," while only 37% said they would "regret" not buying shares and watching the "value move higher."

But there are opportunities to engage these young adults. Experian found that nearly 6 of 10 Millennials are using apps to manage their finances. Appealing to them means offering investment products they covet. And taking the mystery out of the process with the help of short videos, chatty podcasts, and live programming on social media.

Mutual-fund company Fidelity Investments, for example, has an site called MyMoney. It includes sections such as "Money 101" and "Investing & Retirement" with breezy articles like, "The simple thing that helped me save $30,000."

The language is "conversational" and delivered in "bite-sized bits" the way Millennials want it, said Ken Hevert, Fidelity’s senior VP of retirement and college planning.

Financial firms are also working to overcome the myth that "you have to be rich to invest," said Brandon Kreig, CEO of Stash, an investing app and digital financial adviser that helps Millennials and others learn how to invest and build portfolios using low-cost exchange-traded funds.

There are now ways for Millennials to start investing for $1 or even less.

Investing apps include:

* Acorns allows users to round up the cost of their purchases to the nearest dollar and "invest the change" in a portfolio.

* Stash helps young investors build portfolios with easy-to-grasp themes like "Internet Titans" or "Delicious Dividends." It lets users get started with as little as $5, or about  the cost of a Starbucks White Chocolate Mocha.

* Robinhood, an app-based broker, offers free trades and an Uber-style ease for handling financial transactions.

* Stockpile enables investors to buy fractional shares in a company if they don’t have enough money to buy full ones. (If Facebook is selling for, say, $150 a share, and an investor has only $50 to invest, they can purchase one-third of a share.)

Financial firms must also reassure young investors that stocks aren’t as scary as they might think. Despite their pronounced ups and downs, stocks have a history of generating much larger returns over the long term than low-risk assets like cash.

"Education is key," said Francis Kinniry, principal at Vanguard Investment Strategy Group.

Consider Hannah Kronick. The 24-year-old, just two years out of college and working for sports cable network ESPN in New York, said that despite funding her 401(k), she is still not fluent in the language of investing.

"I don’t like putting my money into something that I don’t totally understand," she said. That discomfort is why Kronick said the 8% of her salary now being deducted from her paycheck is going into a cash account. "I’m just getting started saving and will start investing later when I better know what I am doing," she said.

Millennials also are big proponents of "socially responsible" or "ethical" investing.They want to align their financial choices with their values by investing in companies perceived as doing good.

"Solar, clean energy and innovative technologies are topics we discuss a lot," said Tim Sabol, a financial adviser at Ameriprise Financial that caters to wealthy Millennials. Stash offers a "Clean & Green" portfolio that invests in solar, wind and other renewable energy companies.

Arielle O’Shea, analyst with personal finance website NerdWallet, gives high marks to trading apps offered by E-Trade and TD Ameritrade, saying they "mirror a desktop trading platform." Robinhood was cited as the best free-trading app, and Acorns and Stash were noted as the best for beginning investors.

The digital imperative has also driven demand for so-called robo-adviser services. They allow a user to go online, answer a few questions, such as their age, investment time horizon and their feelings about risk. They then receive a computer-generated recommended portfolio.

Nearly six in 10 Millennials said they were interested in robo-advisers, a BlackRock survey found. Betterment, which has no account minimum, and Wealthfront, which requires $500 to get started, are perhaps the best known. But mutual fund companies such as Fidelity, with its Fidelity Go, and retail–focused broker Charles Schwab, with Schwab Intelligent Portfolios, also provide robo services, although their account minimums start at $5,000.

For Millennials, it’s all about tech, even when it comes to staying in touch with their financial adviser.

"It is not uncommon for a Millennial to find me on Facebook and ‘friend’ me," said Ameriprise Financial's Sabol. "Or ask for my cell phone number so that they can text me."