A bittersweet symphony: Advising millennial clients

02/21/2024 — Key takeaways:

• Millennials, diverse and tech-savvy, face unique financial challenges like high student debt and underemployment.
• They access financial info online, differ in marriage views and retirement goals than older generations.
• Financial professionals can offer strategies for early investing, estate planning, and navigating misinformation.

"Cause it’s a bittersweet symphony, this life." From student loan debt to the increasing cost of living and unpredictable job markets, Millennials, much like other generations, are confronted with myriad financial obstacles that can easily derail their financial goals. Like The Verve’s popular 90s hit, "Bitter Sweet Symphony," advising your millennial clients can come with challenges. As the most racially and ethnically diverse adult generation¹, who watched the Twin Towers fall and came of age during the 2008 financial crisis, Millennials probably won’t approach financial planning the same way that their Boomer and Gen X-er parents have. As a financial professional, understanding the differences between generations can help you understand your Millennial clients as you help them plan for retirement and build financial security.

What you should know about Millennials

The Pew Research Center defines generations as people born within the same 15-20 year period.² There’s some gray area on when the last Millennials were born, but the general consensus is anyone born after 1980 and before 1996 would be considered a Millennial. This generation grew up during a unique time—they were old enough to remember 9/11, and many came of age and entered the workforce during a historic recession. Another aspect that sets Millennials apart from older generations? The way they approach marriage. Millennials are delaying marriage, and to some extent, foregoing marriage altogether.³ Knowing this, your Millennials clients will likely differ from your Gen X and Boomer clients in their retirement goals and estate planning.

Unique financial situations for Millennials

Millennials face unique financial challenges—their jobs may have been affected in some way by financial crises. Between 2007 and 2010, when many millennials were entering the job market, they suffered a higher rate of unemployment compared to other groups, which continued for almost a decade after.⁴ Furthermore, compared to Boomers and Gen Xers at the same age, Millennials’ net worth is 20% lower.⁵ This underemployment in addition to student loan debt can impede their ability to save and invest. According to the Education Data Initiative, Millennials carry an average student loan balance of $32,800 per borrower.⁶

How Millennials seek financial information

Millennials and Gen Z differ from Gen X and boomers in the way that they seek financial information—and it’s not surprising, given that these generations grew up online. According to data from a Nationwide’s Advisor Authority survey, 38% of millennial investors have turned to social media for financial guidance. Additionally, around 20% of Gen Z and Millennial investors reported using generative AI platforms for financial information and guidance, much greater than Gen X and Boomer investors. Knowing this, your millennial clients may struggle or fall prey to financial misinformation online.

Retirement planning for Millennials

With life expectancy increasing and uncertainty around social security benefits, millennials may need to plan for their retirement more carefully than older clients. For millennials, investing and saving early can reap significant benefits in the long run due to the power of compound interest. Diversification, regular investments, and having a long-term focus are some strategies that millennials can adopt to help optimize their investment returns. Although the oldest in the millennial generation are nearing their mid-forties, time is still on their side when it comes to saving for retirement. Stressing the importance of regular contributions to retirement funds, such as 401(k) or Individual Retirement Accounts (IRAs), can help ensure a comfortable retirement.

Estate planning for Millennials

It may be surprising to learn that 78% of Americans under that age of 36 do not have a will or trust in place.⁷ Often overlooked by younger adults including Millennials, estate planning is nonetheless important. It may be harder to convince Millennials that they need to estate plan—it’s simply an uncomfortable conversation—but estate planning can begin at nearly any age. It can be helpful to remind Millennial clients that even if they don’t have a high net worth, they can still choose where their assets will go should they pass away. And if they don’t have a spouse or children, it’s still important to give a partner legal power, protect their digital assets, and designate beneficiaries for various payouts.

"Closing time"

We’ll wrap this up with another Millennial classic "Closing Time" by Semisonic: Millennials’ unique experiences, financial challenges, and information-seeking behaviors necessitate a different approach to financial planning compared to previous generations. As a financial professional, understanding these distinctions is key to supporting your Millennial clients. By adjusting your strategies to cater to Millennials’ needs and preferences, you can help this generation build financial security and help them plan for a comfortable retirement.