Financial Advice for Millennials Will Be Different

Financial Advice for Millennials Image of people discussing finances at a table with a laptop open

Millennials Will Ruin Another Industry

Do you remember family restaurants or plastic straws? They are still around, but I can’t recall the last time I sipped through a plastic straw inside a TGIFridays. Millennials have undoubtedly had an outsized impact on the restaurant industry and similarly affect financial advice.

Key Takeaways

  • Millennials are slowly, but surely, increasing their wealth share
  • Millennials face a different economy than their parents
  • Custom-made: Millenials want a financial service that matches their specific goals and needs
  • By wanting to have a positive social impact, millennials are driving socially responsible investing initiatives  
  • Millennials are likely to transition to something other than retirement

Hey, Must Be the Money!

Experts expect millennials to (eventually) inherit a lot from their baby boomer parents. Currently, millennials hold about 7% of America’s total assets, below the 26% owned by baby boomers. About 5% of assets pass to the next generation; that pace will likely double by 2040.  

The pace of wage share is also increasing for millennials. Even with some still in school, millennials now comprise more than a third of America’s workforce. As they continue to gain seniority, millennials earning power will grow by three quarters by 2030. And with that growth, their demand for financial services.  

Millennials Have Different Wants and Needs of Financial Advice Than Their Parents

Millennials, as a whole, are doing demonstrably worse than previous generations. Quite simply, they have more student debt and fewer homes than their parents did at their age. But, despite what their parents say, it’s not their fault. The argument that millennials spend too much on lattes and avocado toast to buy a house was always bullshit.

For starters, they got whacked with two major recessions. The Great Recession hit millennials entering the workforce the hardest. It was hard to get a job out of school with soaring unemployment. More damaging was the stagnation of wages and opportunities for advancement.

After a long slow decade of growth, it seemed like millennials were coming into their own. Millennials were finally taking higher-paying jobs and saving, but then the pandemic cut those aspirations short. The economy contracted significantly, again. Saving money on lattes and fancy toast doesn’t fix missing economic opportunities.    

Millennials Don’t Want the Same Financial Advice

The established wealth management profession currently underserves millennials. These firms grew out of the old sales model but never grew up to give proper financial advice and planning. Today, the most prominent financial “advice” firms’ business models are more concerned with selling products and gathering assets under management.

Even successful millennials may not meet the asset minimum. They are paying off student loans, saving for a house, or whatever else, so investing isn’t a priority. Millennials desire a service that meets their needs and goals; they don’t want to “be sold” on stocks and insurance. 

Financial advisors will have to offer more to the clients than asset allocation. Technology and financial products have become cheaper for younger investors to access. Millennials desire financial advice to help them plan for more than retirement: house, wedding, college planning, student loan repayment, and more.

Millennials will want an advisor who understands their entire financial picture. They want a customized plan to help them meet their goals. Millennials seek access to trustworthy professionals who are not trying to sell them but genuinely understand their objectives and needs.

Young people want to connect to their advisors. At this point in their lives, millennials care more about financial freedom than retirement. They prefer freedom and flexibility to do what they want, even if it means working later in life.     

They Need More Than Meme Stocks

Sure, Gamestop was fun, but millennials need real help with investing. They know they need to be doing more when saving and investing. However, they are overwhelmed and do not know who to trust.

Millennials turn off to spam and aggressive sales tactics often associated with the financial advice industry. Additionally, they have also been through two stock market meltdowns and economic catastrophes in their early careers. It is pretty clear why they have become apprehensive to invest confidently.

Affluent millennials are less likely to hold stocks than older generations. They are more likely to keep extra savings in cash, which is the opposite of what they should be doing. Millennials need trusted financial advice that will help them sort through the complexities:

  • How much should be invested in stocks?
  • What kind of stocks?
  • Where should extra savings go?
  • Is it better to pay off student loans or buy a house?

It’s Not All About the Money for Millennials

Millennials are also changing the way we think about investing. Baby boomers, the millennials’ parents, are far more likely to be emotionally detached from investments. However, millennials are far more likely to believe in social responsibility.

Millennials are the primary driver behind the socially responsible investing movement. Eighty-seven percent of millennials believe that corporate success should be measured by more than just financial performance. Millennials are twice as likely as others to sell the stock of a company that is less socially or environmentally aware.

They are very interested in their investments’ social and environmental impact and want to be drivers of change. Socially responsible investing (SRI) aims to make money AND initiate social change.

Investing in companies with shared values or building a portfolio reflecting millennials’ beliefs will change the way advisors engage clients. Millennials want a financial advisor to build a portfolio that reflects their beliefs and values. Financial advisors will need to offer tailor-made, socially conscious options to meet these needs.  

Not Great Retirement Prospects, and That’s Okay

It’s no secret that the Great Recession delayed millennials’ ability to enter the workforce and accumulate wealth. Millennials are lagging behind previous generations when getting wealth due to factors well beyond their control. As pensions have gone the way of the dinosaurs and social security looks unstable, millennials will have to work longer. Millennials may miss retirement altogether.

Retirment Is Overrated Anyway

It may not be that bad. The world has changed drastically since the industrial revolution. No longer do workers retire because they cannot physically work anymore, but society tells them to.

Many studies suggest that retirement, full stop, may not be a good thing. When workers retire to do nothing, their minds, bodies, and relationships tend to degrade quickly.

The concept of retirement is changing from “stopping work” to retiring TO something. Studies show that workers leaving the full-time workforce are happier and healthier when they transition to another type of work. Millennials will most likely look for a part-time job as an avocado toast maker after leaving the “office” job behind. Millennials will need an advisor that helps them transition to and through this complex stage of life.

The Financial Advice That Millennials Want

The best financial advisor for millennials will find customized solutions to their complex needs and values. The “new” model will focus on answering the worries plaguing millennials:

  • Student loan debt
  • Weak retirement prospects
  • Building an emergency fund
  • Starting a family
  • Buying a home
  • Saving for college
  • Investing in the stock market
  • Social and sustainable responsibility
  • All the avocado toast
  • Getting a golden retriever

With millennials’ wealth rapidly increasing over the following decades, financial advisors will need to change their way of doing business. Millennials want professionals that have a deeper understanding of their financial goals and values.

As a result, financial advisors will have to go further than gathering assets and selling products. Offering services for millennials’ goals and milestones will be central to any financial advisor. Financial advisors that fail to do so will go the way of the dinosaurs, plastic straws, and Red Lobster.

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