Advisors Roll Out Welcome Mat For Millennials

We all know the millennial generation will be the biggest generation America has seen since the Baby Boom. Will they use robo-advisors? Will they make enough money outside of the tech fields so they can sock away money in an IRA, instead of a sock drawer? Or will they be big spenders, constantly upgrading to new technologies and new services at the detriment to savings. “Many millennials definitely have traits and experiences that could serve them well when it comes to planning their finances,” says Dennis Notchick, an investment advisor with Safeguard Investment Advisory Group. “Just to give you one example, many millennials are good about creating budgets. That’s a good habit to have because keeping track of your monthly expenses helps you do a better job of planning and saving. Because of their size, they are going to have a major impact on the economy and on investing in the coming years,” Notchick says. Millennials came of age at a time when the job market was weak and their student loan debt was high. Housing costs in cities like San Francisco and New York make it harder for them to save. Notchick notes that this does not bode well for a culture of saving of investment. A Deloitte study says this generation is expected to grow their wealth significantly in the next several years mainly because they are heading into their prime-earning years, and not because of equity wealth. The oldest millennials are in their mid-30s, a key age for people thinking of big purchases, bigger families, and life after work. Based on his client experience, Notchick believes millennials will still seek out traditional RIAs because:
  • Millennials are proactive when they need advice. Millennials brim with confidence when it comes to money, with 84 percent saying they are confident about their ability to handle their finances, according to a Bank of America/USA Today survey. “But as confident as they are, they realize there are some things they just don’t know or simply can’t learn through a Google search,” Notchick says. “Millennials also are willing to listen to financial advice.”
  • Millennials change with the times. Hello hybrid-advisors. They will be the users of the new models that put tech front and center when it comes to stock picking and managing a portfolio.
  • Millennials take a different route with retirement savings. While boomers were encouraged to contribute to a 401(k) or an IRA, millennials are increasingly looking towards Roth IRAs, Roth 401(k)s, S Corporations and a certain type of life insurance, Notchick says. “They see the giant tax liability that awaits retirees who used those traditional tax-deferred accounts, and they want to avoid it. They prefer to pay their taxes now so they can withdraw the money tax free in retirement,” he says about his client base.