financial planning Preparing Millennials for a Bright Financial Future

This article offers some helpful hints to help you get started on this important task.

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By Andrew E. Crowell

Millennials are now the nation’s largest generation in history, supplanting baby boomers who are entering their retirement years by the thousands every day. This shift is giving way to one of the largest intergenerational wealth transfers in history, estimated to be as much as $30 trillion.

With this transfer of wealth comes increasing financial accountability for millennials, as well as the essential question of how advisors should best prepare this new generation of clients for a bright financial future and the eventual transfer of assets.

All too often, this sensitive topic is the proverbial “elephant in the room” that rarely gets discussed or even mentioned in meetings. While sharing too much specific information early on might indeed be problematic or even a mistake, experience shows that beginning this conversation in a general way, using plain English and avoiding financial jargon, can be a helpful “ice-breaker” strategy for this group.

Beginning the conversation

One way that advisors can broach the topic is by developing a financial mission statement with clients. This activity of defining “Who are you?” and “What is important to you and your family?” helps identify the millennial client’s values and passions and permits the advisor to understand what makes the client tick. This, in turn, will better equip advisors to help their clients achieve their goals.

Furthermore, this approach keeps the focus away from the “How much?” and “When?” and instead redirects the discussion toward the “What’s important?” and “How?” questions. Rather than stopping at simply the amount and disposition of assets, this activity gets deeper to the heart of what the clients’ values are and how they hope to perpetuate these values into the futu re.

Understanding their concerns

A well-documented concern of many millennials is the importance of a work-life balance. Advisors should address these concerns by tackling topics that are important to them in that regard. This can include advising them on how to save enough money to take a one-year sabbatical, best practices for taking advantage of employer matches, or making sure their portfolios are positioned correctly in order for them to retire at a suitable age, with savings that will allow them to live the lifestyle to which they are accustomed.

Research shows that millennials ascribe high value to retirement savings and routinely rank it at or near the top of their financial priorities. At the same time, they are looking to find fulfillment and make a difference in the world. Engaging in conversations about how taking control of their personal finances can help them achieve both of these objectives for the long term can be beneficial in closing the gap between financial and emotional fulfillment.

Millennials wholeheartedly embrace technology; so it’s important that their advisors adopt it as well.

Millennials also tend to become anxious about finances; so sharing ideas on how to save, how to invest and how to budget are all practical ways to continue the dialogue.

Finally, the technological tools and resources available today can be effective methods to keep millennials actively engaged in their own long-term planning process and can help pave the way for a more responsible and financially astute client.

Millennials wholeheartedly embrace technology; so it’s important that their advisors adopt it as well. From electronic calculators to portfolio tracking software to mobile friendly account websites, the internet is replete with helpful information and resources to spark and encourage this conversation.

The goal of advisors who want to prepare their millennial clients for financial literacy and independence should be to encourage an ongoing dialogue with them. These conversations should be initiated early on, and often. Much like how a fitness app helps track health progress, this dialogue will help millennials keep track of their financial “health” and ensure a future of sound financial decisions.