Bridget Casey started her financial blog, Money After Graduation, shortly after receiving her first student loan bill in the mail. She’d just completed her Bachelor degree and the statement read: You owe $20,000. She recalls feeling stunned. “I had no idea how I was going to pay back all of this money, let alone pay my bills.”
That was eight years ago. Since then, Ms. Casey paid off all her debt, managed to start saving, and then she began to invest. “I became so into the stock market that I went back to school and got an MBA in finance,” she adds.
Marked by debt
While Ms. Casey’s story reads like a remarkable tale, it likely rings true for many millennial graduates in Canada. As a generation, these young adults are the custodians of more debt than any generation that has come before. But it isn’t all doom and gloom — despite facing financial challenges, brought on by higher costs for education and housing, this cohort appears confident in going after their financial goals.
Millennials want advice
Confidence aside, millennials still need and want financial guidance. Their first hurdle is to learn how to best manage the money they make. While millennials only make up 27 per cent of the population they currently account for 37 per cent of the workforce — and this will grow to reach 75 per cent by 2025. While they account for a large percentage of Canada’s working population, many millennials can’t count on dependable or sustainable paycheques. Instead, most work in the “gig” economy, made up of part-time work, contracts and, often times, less fixed, annual income positions.
Millennials’ risk aversion stems in part from this lack of regular cash flow, as well as the Great Recession they lived through 10 years ago. As children, they may have witnessed their parents’ and grandparents’ nest egg take a hit during the 2008 global economic credit crunch. As a result, this cohort developed a “general state of distrust of financial institutions,” according to a 2016 Millennials and Wealth Management report by Deloitte, and financial advisors may have to work harder to gain that trust back
“As a very well educated generation, millennials tend to question everything before accepting something at face value, which is a good thing,” says Mark Brisley, Managing Director and Head of Dynamic Funds.
Mr. Brisley is confident that, despite living through the 2008 financial crisis, millennials really want and need sound, solid financial advice. “It’s not enough to provide exceptional returns,” says Mr. Brisley. “Advisors need to match it with exceptional service and a trustworthy brand.”
Millennials are missing out
Unfortunately, millennials are less likely than any other generation to invest, and more likely to put their money in real estate, cash, and gold before the stock market, according to a survey from personal-finance site Bankrate.
Yet study after study shows that when it comes to investing the biggest advantage is time. The longer a person can invest, the more compound interest works in their favour and the better an investment is able to withstand the ebbs and flows of the market.
Finding new ways to communicate
Millennials can actually benefit from solid investment advice now because they have less to invest, more debt to pay off and a longer time horizon to consider. As a result, Mr. Brisley believes that advisors should realize the importance of engaging this investor cohort in dialogue — often with the use of technology. “We shouldn’t make the mistake that technology is a millennial issue, it isn’t,” explains Mr. Brisley, “but this cohort doesn’t just embrace or utilize technology, they were born with it.”
But fancy tech isn’t enough, says Mr. Brisley. Fund managers and financial advisors will need to embrace new, more transparent ways of communicating given this cohort’s comfort with and use of technology. “The platform in which it is offered may differ, but sound, solid advice is still important.”
Given that 82 per cent would appreciate more personal meetings with their investment advisors, according to the Deloitte report, it’s time for advisors to open their calendar. “Smart advisors realize that just like every other generation, millennials want to save and invest. Factoring in their skepticism is just a necessary part of forging a meaningful financial relationship,” says Mr. Brisley. The key is to provide a strategy that’s transparent but offer it through well-known technological platforms that are easy and accessible before scheduling that genuine, in-person meeting. This formula will help move these next-gen investors from passive market observers to active investors — and that’s when real wealth accumulation can occur.
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