Millennials don’t have the same relationship to money that older generations do.
Many millennials, born between 1981 and 1996, are currently reaching their prime working and earning years. In 2016, millennials passed baby boomers and Gen Xers and now make up the largest generation employed in the workforce, according to PEW Research Center.
The problem, though, is many started looking for work or launched their careers during the Great Recession and have found it difficult to get secure jobs that pay well. Although unemployment has fallen significantly since 2008, salaries haven’t bounced back to pre-recession levels.
This economic reality requires a new approach to providing financial advice and other types of money-related assistance to millennials.
We spoke to Angela Moore, a certified financial planner who specializes in working with millennials, about the ways millennials are changing the financial services industry.
“I think that the old school way is played out,” she said. “As wealth transfers from baby boomers to millennials, financial services will be forced to change.”
“The industry hasn’t been built to serve the needs of the average American who is living paycheck to paycheck,” she said.
Here are 9 ways that Moore believes the financial industry must change to better serve millennials.
1. Help them manage sizable student debt
Many millennials are drowning in debt.
“If you’re graduating with $200,000 in student loan debt,” Moore said, it’s hard to get ahead financially.
One way financial advisors can better serve millennials is to help them pay down this debt. But this will require advisors, who aren’t well-versed on the subject, to educate themselves on the topic. “Student loans are extremely complex,” said Moore, noting that there are many different repayment programs with different requirements.
For example, millennials who had pinned their financial hopes on student loan forgiveness in return for public service had a rude awakening in 2018, the first year that they could apply for forgiveness. NPR reported that 99 percent of those who applied were denied. Many were told they had the wrong kind of loan or hadn’t followed the right repayment plan.
Moore sees a role for financial advisors to help millennials navigate the complex paperwork and requirements for this and other student loan repayment plans.
And when it comes to helping them manage crushing student loan debt, the financial services industry needs to turn its attention from a narrow focus on investments, Moore said. Instead, they should be helping millennials create budgets and manage their spending, good habits that will help them pay off debt and save for the future.
2. Address the growing wealth gap
Currently, the number of people in the U.S. that have over $1 million in investable assets is around 4 percent or 5 percent, Moore estimated. “You’ll see more and more of the population be middle class or lower.”
Financial services professionals that only help wealthy individuals protect and grow their assets will miss out on helping a generation that has fewer financial resources. Moore thinks there’s an opportunity for financial advisors to help bridge this wealth gap.
“The industry has to figure out a way to help [lower-income] people as well,” she said. She sees a mission in finding ways to assist people who aren’t already rich build their savings and achieve financial security. “By doing that,” Moore said, “you’re helping the overall economy.”
3. Be more upfront and transparent about fees
Many financial planners don’t disclose their fees until they meet with clients. But millennials want to know what the financial advice will cost them before they schedule a consultation.
“A lot of them don’t want to come into the office and meet with you face to face and waste their time if it’s not a good fit,” Moore said. “They like to see the price up front, clearly displayed somewhere.”
To appeal to millennial clients, Moore now spells out the costs of her services clearly on her website. At a minimum, she said, financial planners should include clear information about how their fees are calculated if they don’t spell out the actual fees. For example, if fees are based on income or a percentage of assets under management, millennial clients want to know that from the start.
4. Provide comprehensive financial services
One of the biggest challenges facing millennials is a lack of financial education, Moore said. Financial advisors can remedy this gap in knowledge by providing more than just investment advice: “A lot of (millennials) want financial guidance.”
Many of Moore’s younger clients have been “winging it” when it comes to their finances, she said. When a big life event comes up, such as getting married, her millennial clients generally need advice on issues like how to combine finances, how to save for a down payment on a house and whether to pay off student loans before taking out a mortgage.
5. Adapt to millennial lifestyle choices
If financial advisers don’t want millennials to tune them out, they must keep the list of can’t-do stuff to a minimum — and find the right balance between saving and spending.
“[Millennials] don’t want to be told that they have to live like a hermit and not spend any money — ever,” Moore said. They want to travel, spend time with their friends, and enjoy life.
“I try to focus on finding a prudent balance,” Moore said. When she creates budgets for millennial clients, she includes cash buckets for Friday happy hours and vacations. “They’re also saving for retirement,” she explained, “but not in spite of living their life currently.”
6. Ditch the paper and communicate digitally
The old model of a sit-down appointment with a financial planner doesn’t work for millennials. “The last thing they want to do is come sit in your stuffy office and talk about their finances,” Moore said.
Millennials want everything to be online. “They don’t like paper documents,” she said. “If someone wants to sign up with me, they can by clicking a button on my website.”
Moore also uses virtual meetings to meet with millennial clients and works around their complex work and personal lives.
7. Boost range of services delivered via technology
Many millennials are digital natives. They want technological solutions to make financial planning easier. “There has to be a huge focus on client experience,” Moore said. “Everything has to be mobile.”
The industry, she pointed out, has responded by creating robo-advisors. But robo-advisors — which use algorithms to build diversified portfolios online with little, if any, human intervention — just help with investing. That’s not enough, Moore said, noting that millennials need help with much more than selecting funds for their 401(k)s.
Moore predicts millennials will welcome AI innovation to help with a range of financial needs. If technology can make saving and budgeting quicker and easier, for example, millennials will most likely hop on board.
8. Apps are replacing traditional accounts
Millennials want to manage their money on their mobile phones, making financial apps indispensable.
“Most of the clients I talk to are using multiple apps,” Moore said. They use apps for investing, budgeting and saving.
“It’s rare that I see clients that have a traditional bank account,” she added. “They often use online banks and programs that offer special (interest) rates such as Ally Bank, Capital One bank, the Goldman Sachs Marcus account and the SIMPLE bank app.”
Millennials want to take care of their financial lives on the go, she said. Apps are important tools to help them manage their investments and checking accounts when and where they want.
9. Find ways to reduce financial stress
Moore sees a lot of money-related anxiety in the millennial generation. She has witnessed part of the source of that stress – skimpier salaries — in her own life.
When she graduated from college in 2002, she noted, starting salaries were around $60,000 for someone with an accounting degree like her. Now, recent graduates are getting entry-level jobs for $40,000 to $50,000, if they can find a job at all.
She sees a huge opportunity to provide financial literacy for younger clients. Knowledge, she said, can go a long way toward reducing financial stress.
A bigger emphasis on education is a win-win for the financial services industry. “If you, as a financial professional, can step in” and help relieve financial pressure, “there’s a huge market for that,” Moore said.