As a financial planner, I spend a lot of time thinking about how to approach the different goals of my clients. While each client has a unique set of needs and circumstances, I’ve been studying and observing generational trends with a keen interest. Baby Boomers are approaching retirement, or newly retired, and are redefining what retirement means compared to their parents. Gen Xer’s (born 1965-1979), like myself, are mid-career and working towards myriad goals with cautious self-reliance. And then there are Millennials (born 1980-2000), who are now starting their careers and families and making their own stamp on financial planning.
Each generation has unique ways of doing things, and it’s not simply that today’s 30 year old has the same issues as a 65 year old had 35 years ago. We often hear about the financial challenges facing Millennials: student debt, living at home longer, less decisive about careers, delaying starting a family. There’s no doubt Millennials have been shaped by two recessions, a war, a housing bubble and collapse, and a difficult job market for entry level employees. But, there’s more than enough articles detailing those concerns. I want acknowledge three of the things they are doing right, because there are plenty of Millennials who have high expectations and are well on their way to becoming wealthy.
1) Millennials participate in their investing. Growing up with Google, cell phones, and the Internet, Millennials are going to gather information, confirm details, and find out what their friends and colleagues are doing. Comfortable with technology, they favor paperless banking and are more organized than previous generations, keeping track of their finances using online tools, mobile apps, and programs like Mint or Quicken. We can have meetings by video conference or webinar, and there will be no difference between having an advisor who is one mile away or a thousand miles away. Technology is here to stay, and is really only getting started as far as its impact on the planning process.
Millennials are more personally involved in their finances, seeking to be partners with advisors, rather than delegators. The more Millennials read about the rationale behind using index funds, the more indexing makes sense. They want to find an investment solution that works and are not as competitive about wanting to “beat the market”. Even when they use index funds, they want a plan which is customized just for them and their goals, and not a cookie-cutter plan. In that regards, they are actually more likely to value financial planning than Gen X.
2) Millennials are more frugal and less materialistic. They recognize that buying things you can’t afford with a credit card is a mistake. And while they want the financial freedom to express themselves as a unique individual, they are less interested in trying to impress others with a display of wealth. They understand that having more “things” doesn’t make you happier. Overall, Millennials are making good decisions as consumers and would likely have less debt than previous generations, if it weren’t for the dramatic rise in student loan debt in recent years.
3) Millennials recognize when renting is a better fit for their lifestyle than owning a home. They saw the effects of the housing crisis and likely know people who went through foreclosure and lost their homes. Unlike previous generations, they no longer consider home ownership as the definition of adulthood or as a sure-fire investment. Baby Boomers typically bought a house as soon as they could, upsized when possible, and used their home equity to fund their lifestyles. Millennials want community and convenience and are less willing to tolerate a long commute to the suburbs to afford the largest home possible.
For Millennials who are career driven, renting offers the flexibility to move anywhere in the country as their career dictates. This change reflects the new reality of today’s job market: employees aren’t going to have a career with just one or two companies. They need to move to where the jobs are located.
Millennials outnumber Gen X nearly 2 to 1, so they will have a significant impact on the development of our economy, business, and even the future delivery of financial planning. I don’t view the generational differences as right or wrong, or better or worse. Each is a product of their environment. What I am interested in is understanding each investor fully so that our plan can be as thorough and complete as possible in helping each achieve their goals. That’s my commitment to you and why I built Good Life Wealth Management: to provide the flexibility and resources to enable investors of any age to create and execute a plan that works.
And for those of use who are a little more experienced, keep an open mind – it’s never too late to learn a few new tricks from the younger generation!