Rona Birenbaum, certified financial planner and founder of Toronto-based fee-only financial planning firm Caring for Clients, has made it a priority to work with several clients of lower net worth – including millennials, many of whom are new to investing and still may carry student debt – on a pro bono basis or at reduced rates.
“If someone just wants an hour or two of our expertise, they don’t have to have a large portfolio or invest a lot of money to get really sound advice,” says Ms. Birenbaum, adding that her goal as a financial planner is to help “anyone who’s looking to use financial planning as a way of helping them make decisions to build their wealth or to minimize debt” – regardless of their financial circumstances.
For Ms. Birenbaum, doing pro bono work for younger clients is a long-term investment in her own firm’s future success. Although her short-term motivation for advising clients without charging them is to help them get on their feet, she and other advisors delivering pro bono work see a long-term payoff to helping younger people reach a place at which they will be able to afford to pay for advice.
“It’s not absolutely necessary that every client in my client base be a high-profit client in the moment that we’re working with them,” she explains. “We see potential in some millennials and we want to partner with them over time.”
Although eliminating the cost of financial advice is one way to assist this underserved demographic, there are other factors that inhibit many millennials from working with a financial advisor or financial planner, Ms. Birenbaum says. For one, there’s widespread “perception that an experienced financial planner wouldn’t want to talk to them,” which also keeps people in this age group from taking the first step. “There are lots of millennials out there who don’t realize there are many financial planners who would be more than happy to work with them.”
Instead, many millennials are drawn to robo-advisors, which are accessible because of their low account minimums, fees and convenience. Nevertheless, there’s strong evidence to show that the majority of millennials still desire bespoke human financial advice.
According to a study from Hoboken, N.J.-based fintech firm LendEDU published in April, which surveyed 1,000 U.S. millennials between the ages of 23 and 38, 65 per cent said they would prefer a human advisor over a robo-advisor. What’s more, 89 per cent of millennials who work with a human advisor said it’s well worth the cost.
“Advisors who once thought that millennials were not a good target market are now realizing that millennials, clearly, at some point in their lives, are going to be more like the profile of clients they seek today,” says George Hartman, president and chief executive officer at Market Logics Inc. in Toronto. “And [advisors] need to engage in a relationship with [millennials] early in the process.”
Alim Dhanji, senior financial planner at Assante Financial Management Ltd. in Vancouver, is one advisor who has taken this message to heart. Mr. Dhanji, whose business is focused primarily on physiotherapists, advises some students from the University of British Columbia’s Department of Physiotherapy on a pro-bono basis every year. As part of that relationship, he teaches them sound financial habits and principles, assists them with their taxes and helps them establish strategies for reducing their debt and increase their long-term savings.
Mr. Dhanji says the benefits of providing free financial advice to millennials are two-fold: it’s an investment in his own practice as much as it is a way to aid an underserved community.
“If I can get them started on the right path, then, later on, when they have more savings and more money, they’ll come back and work with me,” he says. “You put good out there and good comes back to you. I’m trying to help these younger millennials get started on the right path. They appreciate that and they remember.”
Mr. Dhanji also says part of his motivation for delivering pro bono financial advice to students is to fill gaps in the North American education system relating to financial literacy.
“You don’t get [these lessons] anywhere,” Mr. Dhanji laments. “You don’t get this in your curriculum at school. … This type of training or coaching is super valuable. It gets people thinking; it gets them consciously aware of what to do.”
Although taking on clients without pay may seem daunting or unfeasible, Mr. Hartman, who’s worked extensively as a consultant with advisors aiming to increase their businesses, advises all of his clients to do a small amount of pro bono work.
“Here’s the truth of the matter, if you dig deep enough into most advisory practices, they’re already doing pro bono work for a lot of clients, they just don’t realize it, because the clients are generating a small amount of income and consuming resources, such as the advisor’s time,” he says. “All I say is I encourage you to do it. Just recognize that you’re doing it and determine how much of your time and resources you’re going to commit to it.”
Although committing to providing services on a pro bono basis may not deliver immediate dividends, it does eventually pay off. Mr. Dhanji says he’s reaping the benefits of his pro bono work after 18 years of advising students.
“The people who come and see me for this type of coaching, they’re just so much further ahead,” he says. “I can measure it now, in terms of what happens 10 years down the road. The people that usually come see me early are usually the ones that are most successful with their money.”