Editor’s Note: This is the first installment of a monthly blog by Ironstone team member Nicole Anglace that will discuss all things “Millennial”, as well as the contributions Millennials can provide to the financial services industry, both as clients and employees.
Don’t overlook Millennials as clients. There are several factors that make Millennials desirable:
- We have debt (think student loans)
- We will soon be entering the prime of our careers
- We want to build credit
- We want that fancy house with the nice yard
- We want to travel
- Many of us want to get married
Help Millennials solve their problems now, and you’ll be creating clients for life.
Millennials make up the future of the workforce. However, it is a common perception that we lack sufficient finances and our financial issues aren’t complex. Some industry experts feel that Millennials are not yet attractive clients for independent financial advisors because issues faced by Millennials are not complex enough to be worth such a professional’s time.
However, I disagree. Instead of being hindrances, I think that Millennial financial issues actually represent reasons why Millennials both need help and should not be overlooked as a potential client base. The following issues underscore the need for such an association:
- We don’t know what we are doing with our money
- We have debt
- We have both short-term and long-term goals
- We don’t know who to trust when it comes to financial advice
According to a January 2016 PWC report, a fair portion of my generation (~30%) overdraft their checking accounts. This same report indicates that nearly half of the surveyed Millennials don’t believe that they could afford to pay $2000 in the event that an emergency arose in the next month. This fact is surprising given that 86% of Millennials claim that they are actually saving money, and 20% of those saving money do so in the event of an emergency.
It is likely that the documented inability to cover emergency expenses may be a result of improper budgeting, or a lack of a fully functional financial plan. In a January 2016 report Facebook reports that 52% of Millennials say they do not know how to go about creating a financial plan.
Debt is a major concern for Millennials, not only those with student loan debt.
This fact isn’t surprising as PWC notes that 2/3 of all Millennials carry at least one source of long-term debt, and roughly 1/3 of the generation, even those without college degrees, have more than one source of long-term debt.
Additionally, PWC reports that 53% of Millennials carry credit card balances in the past 12 months. As PWC puts it, Millennials are “financially fragile.”
As the Millennial generation spans two decades (1980s-early 2000s), it is not surprising that we are not all focused on the same goals. Generally, younger Millennials (typically those who are between 20-30 years old) are more inclined to focus their attentions on short term goals. On the other hand, older Millennials place a greater emphasis on long-term opportunities.
Short-term Goals: 43% of Millennials indicated to Facebook that their top priority is paying off debt. Roughly the same percentage of Millennials (46%) characterize financial success as being debt free. To many Millennials, reaching this level of success feels like a daunting task, especially because paying off student loan debt isn’t our only goal—we want to do other things (travel, own a car, maybe even pursue another degree).
Long-term Goals: Most Millennials don’t properly invest in their savings. According to the Facebook IQ study, the main reasons for this underinvestment stem from the belief that not only do we not have enough money to invest properly, but also that we don’t know enough about investing.
PWC points to the fact that only 36% of Millennials have a retirement account established. Sadly, even this financial security is often compromised as 17% of those with such accounts have had to take a loan from them and 14% have taken hardship withdrawals all in the last year. Chances are, the average millennial doesn’t have a solid grasp on the function/benefit of a Roth IRA over a traditional IRA.
For these individuals, the most valued source of information for all things is the internet. When we have questions, we turn to our family and peers. Unfortunately for financial advice seekers, only 24% of Millennials demonstrate basic financial literacy.
Chances are, the peers who are offering advice aren’t properly informed. Due to this lack of knowledge, the majority of Millennials (53%) admit that they don’t have anyone to turn to for financial advice. Moreover, only 36% of Millennials talk to their parents about money.
Considering the lack of reliable information, it is rather shocking that the percentage of Millennials who would consult a financial professional isn’t higher. According to PWC, in the last year a total of ~39% of those surveyed consulted professionals: 27% sought savings/investment advice and 12% sought debt management advice.
However, the total is most likely even lower, as the report does not mention the percentage of individuals who sought both kinds of advice.
3 Ways to Help Millennials
The most effective way to help millennials is to have advisors who can empathize with the life stages and transitions we are going through—people who have recently gone through these themselves. Beyond hiring employees from the Millennial pool, Facebook suggests:
1. Offer Millennials solutions that address our pressing needs and help them manage multiple financial priorities (e.g., paying down debt vs accumulating savings).
2. Make credit a strategic tool that gives financially responsible and goal-oriented Millennials the flexibility to achieve their short-term goals faster and build the credit they’ll need in the future.
3. Make financial planning a gateway: Helping Millennials develop a financial plan now will not only provide them with a much-needed service, but it will make you a more valuable partner as you open their eyes to new financial opportunities.
Millennials need your services. I know I would find such advice beneficial, and that many of my friends would as well. I recommend that you consider taking steps to add Millennials to your client base. Above all else, hiring Millennial workers is the most effective way to attract Millennial clients.
But more on Millennial workers later…
– Nicole Anglace, Ironstone