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Don’t overlook the millennial client

Reaching out to Gen Y should be a priority for advisors.


Date: September 28, 2015

It’s a time of burgeoning careers, growing incomes, mounting debts and new acquisitions. But today’s millennials – especially those aging Gen Yers who are beginning to buy homes and start families – should also be thinking about their financial futures, ensuring that tax, retirement and even estate plans are underway.

For financial advisors, finding ways to be relevant to these young clients is critical, says Rocco Taglioni, Senior Vice-President of Distribution and Marketing for Individual Insurance and Wealth at Sun Life Financial Canada.

“Millennials are an extremely important and growing demographic,” says Mr. Taglioni, noting that Canadians born since the early 1980s account for about 27 per cent of the country’s population and need financial advice. “They shouldn’t be overlooked.”

Millennials are “extremely tech-savvy,” notes Mr. Taglioni, looking to social media for news, education and advice on key life decisions. Planning for their financial future is no different. “Advisors should be mindful of this, in both how they reach out and prospect new clients from Gen Y and how they approach the first meeting,” he suggests. “They are a prepared bunch.”

Ayana Forward, a certified financial planner at Ryan Lamontagne Inc., a fee-based financial planning firm in Ottawa, says that advisors often don’t see the advantage of working with millennials because they “don’t necessarily have assets to invest,” although many soon will. “It’s a missed opportunity if we don’t focus on these people.”

Ms. Forward, who at 36 is an “aging millennial” herself, says that planners should act as an “educational resource” for young clients “as opposed to someone pushing a product.” This can simply mean helping them understand that “the earlier you start, the more you’ll have at the end.”

Young people with their multiple priorities and lack of time appreciate having someone to prompt the planning function, says Ms. Forward. While some want to pay a fee to “take it off their plate,” others are looking for someone to validate their own thinking, check their numbers and confirm they're on track.

One challenge with helping millennials plan their financial futures is that “retirement seems so far away,” says Mr. Taglioni. Tackling debt is much more of a priority than saving for the future, especially for those who have been dealing with student loans and rising living expenses. At the same time, workplaces today often have myriad savings options that are employee-driven, as opposed to years past where employees were guided in the choices they made, he says. “Because of this, and perhaps a lack of experience dealing with money and financial issues, they can feel overwhelmed.”

There is an especially strong need for financial literacy among young people because many of them may one day receive large inheritances from their parents and grandparents, which should not be considered “a lottery win,” Mr. Taglioni cautions.

“It can significantly kick-start their savings or even create their full retirement plan, depending on the transfer,” he says. “This money should be managed and continue to accumulate and potentially include protection. It’s about seeing the big picture, preparing for their future and potentially their family’s future.”

In terms of risk tolerance, millennials “have the benefit of time on their side,” says Mr. Taglioni. “They can afford to suffer from dips in the markets, because they will also experience corrections.” Gen Yers can take advantage of a longer time horizon and a variety of products and solutions to meet their savings needs, he points out. They can risk higher-yield options to grow their wealth, then move into lower-risk options when closer to retirement or in the event of other life changes such as a new home purchase, marriage or children.

Ms. Forward has noticed, however, that many millennials tend to be “holding on tightly to their assets,” which she attributes to the 2008 and 2011 financial setbacks “hitting that age group” and prompting them to park their money in cash. Ideally, they should have a broad mix of investments, some in equities and some in fixed-income products, she says. “You need a balanced portfolio that can supply some growth.”

Financial planners can also help millennials look over life insurance plans to ensure they have appropriate coverage, says Ms. Forward, as well as turning their attention to wills, powers of attorney and offering tax preparation advice.

Mr. Taglioni says there is no “one-size-fits-all approach” to engaging millennials in planning for their financial futures, but advisors must build a connection to provide information in the way they want to receive it.

“Millennials do share many goals of previous generations, including home ownership, marriage and retirement, but advisors should address their different approach to how they spend and save money.”

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