Various assumptions about young investors do not square with Rochester-area financial planners’ experiences serving the demographic. Contrary to popular belief, millennials accept advice from their parents’ advisers and generally do not make reckless investment decisions.
Still, financial planners have needed to adjust in order to build relationships with Generation Y, predicted to become 75 percent of the global workforce by 2025. Unlike baby boomers, young clients simply do not see the value in meeting face-to-face to discuss their investments.
“They really do rely on technology for communication,” says Todd Green, chief investment officer at Pittsford-based Alesco Advisors LLC.
Millennials would much rather get an email than a phone call and have no problem with communicating electronically after hours or on weekends, he adds.
Segmenting the planning process has helped High Falls Advisors Inc. connect with Gen Yers, says Michael Ross, vice president for business development at the Rochester-based firm.
“Just looking at a very specific piece of the financial plan, which for millennials would just be retirement planning … I think that’s a digestible piece for them” in one sitting, he says.
At Cooper/Haims Advisors LLC, young clients take a hands-on approach with their financial future, says Jared Haims, partner and adviser at the Victor-based firm.
“And we also see with millennials … that both spouses are engaged in the planning process,” he adds.
Though challenging the status quo has earned millennials the more pointed nickname “Generation Why,” research shows 30-somethings are open to suggestions for achieving financial well-being.
According to a 2014 study from TIAA-CREF, 75 percent of millennials who sought financial advice were ultimately more likely to monitor their spending, compared to 63 percent of the general population who did not receive any guidance. Seventy-six percent versus 62 percent were willing to change their spending habits, and 70 percent versus 56 percent were willing to increase their monthly savings.
Millennials usually turn to various sources for feedback on money matters, TIAA-CREF’s study also shows. Family and friends hold sway over the cohort, as do financial-service providers’ websites and online tools. Also, only 22 percent of the study’s millennial-aged survey respondents believed they were too young to worry about needing financial advice.
Though many young investors are eager to plan for the future, they often need help achieving balance.
“Sometimes I have to say to them, ‘Well, you know, that’s great that you want to start saving for (your child’s) college (tuition), but you also don’t want to neglect saving for retirement,’” says Jeff Feldman, owner of Rochester Financial Services in Pittsford.
He adds: “It used to be saving $1 million by retirement (was) enough to retire, and now for millennials, with inflation and everything, it probably will be a lot more than that. It’s hard to figure out exactly what a 35-year-old will need 50 years from now, but it’s going to be quite a bit of money.”
Some millennials assume they will retire at age 55, but “normal retirement age might creep up to 70 or 72 in the next 10 (or) 20 years,” Feldman says.
Despite getting knocked for being fixated on instant gratification, few young investors expect to profit from speculation, local financial planners say. If anything, millennials tend to be conservative investors.
“I think they’re definitely scarred by the 2008-2009 recession market crash and, if they’re old enough, certainly by the dot-com bubble crashing, so they’re very skeptical of the markets. They’re skeptical of long-term investing,” Green says.
He adds: “They may be permanently scarred. They’ve had to enter the job market at a very difficult time for young people. Job security is not what it used to be.”
Generation Y’s knack for looking at life holistically affects how they picture their financial future, Green says.
“This generation of millennials definitely has a different definition of success than the baby boomers do or did,” he says. “It’s not just about financial success. They also want to have a greater emotional experience, and they’re after a lot of life experiences, so we have to understand that there’s more to their planning than just the money side of it.”
Amid fewer millennials setting foot in brick-and-mortar banks, the financial-service industry has made strides with overhauling client interaction, from offering electronic account statements to leveraging social media and Skype.
At Cooper/Haims, keeping up with technology has meant providing clients with personal financial homepages that show real-time, aggregated information about their investment and 401(k) accounts.
“And then what’s nice is that it feeds into their cash-flow projections, which is really their retirement plan. So it’s a living, breathing plan,” Haims says. “Traditionally, you’d give someone a binder of their plan, and then it’s really outdated six months later.”
Capitalizing on young investors’ appetite for technology while allowing low account minimums has sparked online services that provide automated, algorithm-based portfolio management advice without using human financial planners. Wealthfront, Betterment and other national robo-advisers typically use the same software as traditional advisers but do not get involved in more personal aspects of wealth management, such as estate or tax planning.
Yet even millennials who live for condensing their thoughts into 140 characters may miss having a warm-blooded sounding board.
“When the next big correction takes place, I’m interested to find out how well these robo-adviser platforms are actually doing,” Ross says. “I’m not surprised they’re getting money into them now, given that it’s an up market, and it’s easy for anybody to invest. But when the down market happens is when people want to talk to somebody.”
Though appealing in some ways, robo-advising does not suit investors with complex finances.
“It fits people into certain models, and if you fit into a model, that’s great,” Green says. “But if you don’t, then you do need the advice of a personal financial planner or personal investment adviser.”
Few financial planners here or elsewhere depend on social media alone to bring young clients aboard, but they say it does pay off to have a presence on different platforms.
“Hopefully, we are furthering our brand by using Facebook and LinkedIn,” Ross says. “So it’s more a brand-recognition (strategy) than it is actual getting clients at this point.”
Despite the assumption that millennials scoff at brand loyalty and go their own way when it comes to managing their money, local financial planners and investment advisers say they secure most of their young clients through referrals from parents.
And they tend to stick around.
“When it comes to something as important as your finances and your investments, I would like to think if you find a place that you trust, you’ll stay with them and also recommend them to others,” Ross says.
Sheila Livadas is a Rochester-area freelance writer.
6/26/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.