Millennial advisor

Jon Lagerstedt polled Millennial advisors for five tips to help build a practice. Jon shares his findings with Wayne Badorf, CFP®, CFS®.

Wayne Badorf: Today we explore some ideas for advisors who are Millennials. I’m Wayne Badorf.

Jon Lagerstedt: And I’m Jon Lagerstedt.

Wayne: And this is The Essential Practice.

Jon, I thought we’d spend time today talking about an article that appeared in FinancialPlanning.com (login required) that you wrote called Five Tips for Millennial Advisors. Let’s start by just talking about what made you want to write the article.

Jon: It’s interesting. Everywhere you look, there’s a ton of information around serving the Millennials, and what got me thinking was, what about the Millennial advisors, the younger folks entering this business. What are some of the challenges of financial advisors that I know, new advisors—to pick their brains and get their advice as to steps that others avoid or maybe take advantage of.

Are Millennials managing volatility or avoiding it?

Do a Google search on Millennial investors and you’ll find a fairly cookie-cutter assortment of results. They’re making huge mistakes. They’re afraid of the stock market. They’re never going to have enough saved for retirement. Their fate is certain doom. Woe is Millennial.

Now compare that web of critique with the reality of what Millennial investors are dealing with in their financial lives. More than half (56%) of Millennials say they live paycheck to paycheck, and nearly half use 50% or more of their income to pay off monthly debt, according to the 2014 Wells Fargo Millennial Study (pdf). And according to Pew Research, Millennials are the first in the modern era to have lower levels of wealth and personal income than the two previous generations had at the same age.

Let’s show a little empathy, internet! It’s no wonder 43% of Millennials identify themselves as conservative investors, according to Accenture. Millennials want to avoid losing money because they have no leeway to lose money. Now, this doesn’t mean Millennials aren’t saving—even under financial pressure, they still maintain a healthy view of investing and are warming to the market. But here’s the problem: In attempt to prepare for volatile times, many Millennials are not managing volatility in their portfolios. Driven by the risk of losing money, many are simply avoiding volatility altogether. Consider the following infographic:

Discover what’s unique about Millennials with Wayne Badorf, CFP®, CFS®, and Jon Lagerstedt.

Jon Lagerstedt: Wayne, we’ve gone through the generational timeline, spanning 56 years looking at Traditionalists, Baby Boomers, and Generation X. Today we’re going to focus on the Millennials, the largest of the four generations here in America. I’m Jon Lagerstedt.

Wayne Badorf: And I’m Wayne Badorf.

Jon: This is The Essential Practice.

Wayne: Jon, that’s a big generation we’re going to talk about today, the Millennials, 89 million. Who are these Millennials?

Jon: Well, you know, the Millennials are an interesting group. They’re tech savvy. Some would say they’re very realistic, socially conscious. They want to be involved with their community, and they also, from a financial perspective, had their values shaped during some really tough times. We went through the market crash of ’87, the tech bubble popping, the Great Recession, and many would be very conservative, even more so than the Baby Boomers in a lot of surveys that we look at.

$20.67: Average hourly wage in 2014 is the same as the inflation-adjusted average wage in 1979.

I’m a big fan of the Beloit College Mindset List. Every year, the authors publish a list of things that define—or don’t define—the reality of the incoming class of college freshman. In this year’s list, for example, we learn that the Class of 2018 has never watched Saturday morning cartoons, has always thought of Hong Kong as a part of China, and has never used Netscape as a browser. The list offers a nostalgic way to check and challenge the assumptions we make about other generations.

Perhaps no other generation has had so many assumptions heaped on top of it as Millennials, particularly regarding financial matters. To that end, here’s an investment version of the mindset list for Millennials, as well as what they mean for new investors and the financial professionals who help them.