Bobbi Sills highlights four key financial planning challenges faced by Millennials and how advisers can overcome them
To the average young investor, financial planning can seem a daunting prospect. From burgeoning student loan balances to the rise of the gig economy and the economic impact of Covid-19, Millennials face growing financial pressures.
Data released by behavioural finance experts at Oxford Risk reveals that 16% of consumers aged 18-34 with stock market-related investments and savings took more professional financial advice during the uncertainty of the pandemic than usual.
But what are the key challenges faced by clients of the future and how can advisers ensure they are best equipped to tap into the unadvised market post-Covid-19?
1 Impact of student debt
Lingering student debts accumulated from university fees or higher educational studies are a burden when trying to invest for the future, notes Sarah Lord, chief client officer at Succession Wealth and president of the PFS.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, agrees, noting that young Millennials are less likely to want to pay for advice as they are already juggling relatively low earnings with the cost of housing and dealing with debts from their student years.
She says: “This is a group of people who could really benefit from guidance to get them on the right path, but typically only the most well-heeled are prepared to pay for advice.”
As a result, Ms Coles says Millennials are more inclined to opt for a service where they can dip in and out of financial advice, only paying for it as and when they need it.
However, a retainer-based business model that does not rely on prohibitive one-off fees could go a long way to attracting clients from the Millennial generation and making it a viable proposition for both the adviser and the client, according to Ms Lord.
2 Tech-savvy generation
Unlike the Baby Boomer generation, Millennials have grown up in a tech-dominated world where they are used to accessing information at the click of a button.
The rise of robo and digital advice in the last decade has introduced a quicker and easier way of accessing guidance through low-cost automated investment services.
But as Ms Lord acknowledges, it is important that advisers strike a balance between digital services and face-to-face interaction when considering how technology can support the end-to-end client journey.
Technology solutions cannot replace the personal relationship building and soft skill questioning and analysis of an experienced planner, particularly during the uncertainty of the pandemic, notes Ms Lord.
She says: “Businesses should focus on adopting more of a hybrid model with an emphasis on technology to empower the client journey, but still making sure that there is a level of human interaction when a client needs it.”
Millennials have grown up in a tech-dominated world where they are used to accessing information at the click of a button
3 Gig economy culture
The gig economy work culture means that traditional nine-to-five office hours are a thing of the past for our clients of the future.
Helen Morrissey, pension specialist at Royal London, highlights that the Covid-19 pandemic has created more uncertainty for Millennials around incomes from freelance working and impacted their ability to save regularly into pensions and ISAs.
Adopting a flexible business model that allows people to access the information and tools that will help them with their financial journey 24/7 is key to ensuring engagement with these clients, according to Ms Morrissey.
She says: “Digital budgeting tools and apps can enable clients to keep track of their pension balance or cashflow on the go from their mobile phone.
“Being able to track growth in this way makes the proposition more relevant for the client and brings it into the here and now.”
4 Accessing advice
A lack of understanding of financial terminology by younger investors means that advice is not always accessible, notes Ms Lord.
Where possible, advisers should try to speak the language of the client to demonstrate how they would benefit from their services.
Ms Lord says: “We try hard as a profession to avoid the use of jargon but we must also ensure that we are incorporating case study examples that are relevant to the specific cohort or client demographic.”
Demonstrating how advice is relevant to younger investors also helps raise awareness that financial planning can be accessed by everyone, regardless of what stage they are at in their journey, notes Ms Lord.
Building trusted relationships early on will also increase the likelihood of younger generations feeling comfortable about seeking financial advice when they eventually need it, according to Ms Morrissey.
She says: “Advisers can build a younger client base by engaging with family members of their clients and helping them to understand how financial planning works at an early age.”
Bobbi Sills is communications executive of the PFS