2021 is a notable year for the Millennial generation as the oldest of us turn 40.
As Millennials move into middle age, we’re shedding some of the stereotypes that have dogged us for years—fewer Millennials are living at home with Mom and Dad today, for instance. Many of us are well into achieving important milestones such as marriage and home ownership, but doing so at later ages than previous generations.
But we continue to face obstacles that have been unique to our generation, many of which are financial. Student loan debt is perhaps the biggest burden carried by many Millennials—around one-quarter of those under 40 still owe student loan debt at an average balance of over $40,000. For many, financial management is a tug-of-war between competing priorities, from paying down debt, to planning for retirement, to trying to afford a first home or raise children.
As a personal example, childcare expenses for my family skyrocketed during the pandemic when our kids’ schools went to hybrid learning and we relied on outside care providers so that my wife and I could continue to focus on work. Many families faced hard choices about childcare over the past year, and many times it was women who bore the personal costs of leaving the workforce to care for children.
The good news is, increasingly Millennial investors are seeking guidance in managing the complex demands of financial planning. Only 50% of Millennials said they worked with an advisor or financial professional when Nationwide conducted our 2016 Advisor Authority study powered by the Nationwide Retirement Institute. This number grew to 75% in our latest study, conducted in May and June 2020 in the midst of the pandemic.
Millennials warming up to the benefits of financial advice is an encouraging sign. Despite the stereotype of Millennials being “entitled,” I tend to think we are more of a “do it yourself” generation. There are so many resources for information these days that make it easy to learn how to do nearly everything. But I believe long term financial planning is too critically important to do on our own. Many of us lack the right expertise or adequate time to devote to it, on top of our careers, family obligations and personal responsibilities.
Professional guidance from a financial professional is designed to ensure you’re covering all of your bases with holistic planning for your family’s financial wellbeing—now and in the future. That’s why it’s exciting to see Millennials are approaching advisors and financial professionals at their own pace and with specific needs at the forefront.
What Millennials want in financial advice
What factors do Millennials consider when looking for an advisor or financial professional? According to our study, experience counts but not as much as it does with older generations. All age cohorts listed experience as the #1 factor when choosing a financial professional, but just 41% of Millennials said so, compared with 47% of Gen Xers and 57% of Baby Boomers.
Holistic planning around personalized advice is also important—it was the #2 factor for all investors when choosing a financial professional, according to our study. But Millennials place more weight on holistic planning (31%) than Gen Xers or Boomers (both at 25%). That makes sense to me. Young adults always have to balance multiple financial priorities as they grow more independent, but my generation has had to do it on shaky ground in the years following the Great Recession.
It’s also no surprise that technology is more important to this generation of digital natives. We were born in the age of computers, raised on the Internet and took flight with the introduction of smartphones. We’re far more interested than Gen Xers and Boomers in using mobile technology to connect with our financial plans and financial professionals. When the mood to review my financial plan strikes, I want to access everything at my fingertips. We also bring higher expectations for website enhancements and client portals for our financial relationships than older generations.
Many in my generation also want to work with advisors and financial professionals who are Millennials themselves. While we value the experience of older financial professionals, working with multi-generational teams that include younger professionals is important to more Millennials (17%) than either Gen Xers (11%) or Boomers (2%).
Getting a little more comfortable with risk
During times of market volatility, advisors and financial professionals can help investors find calm and avoid knee-jerk or emotional decisions. Our study found that nearly 20% of Millennials listed this as the top benefit of working with a financial professional.
When markets turn volatile, Millennial investors generally focus more on the emotional impact. Many of us still have memories of the Great Recession, the bursting of the housing bubble in 2007 and near collapse of financial markets in 2008. Millennials developed a strong aversion to risk during the Great Recession and the years that followed, and many in my generation tended to avoid stocks as a result of that market turmoil.
Millennials have grown more tolerant of risk in recent years, but last year’s bear market at the outset of the pandemic tested this newfound resolve. Unfortunately, a number of investors reacted to the sudden downturn by selling assets from retirement accounts. This happened across generational lines, but our latest Advisor Authority study found that Millennial investors were more likely to liquidate their 401(k) and IRA holdings (13%) than Gen Xers (5%) or Boomers (2%).
Feeling in control—even if they can’t control everything
For this Millennial, a holistic approach to financial planning has been an important priority. Many of us have real worries about the risks of today’s markets and economy, and are uncertain about long-term planning. Developing a close relationship with an advisor or financial professional can go a long way toward relieving some anxiety about the future.
Your Millennial clients will benefit from understanding more about the different types of risk they face and learning how to find the right balance among competing financial priorities throughout every stage of their financial lives. Strategies for managing debt and building emergency savings are essential for helping your Millennial clients to solve for short-term needs that, if left unchecked, can derail them from reaching their long-term goals. Strategies for investing and retirement planning can help them navigate a range of different market cycles, protecting their savings assets against risk while maximizing the power of compound growth to build a more solid financial future.
The right combination of short-term and long-term planning can help Millennials keep their emotions in check when markets get volatile. As Advisor Authority shows, 88% of Millennial investors say that having a plan helps them feel in control, even if they can’t plan for everything.