Financial Advice for Millennial – But will They Read It?


A quick answer is probably not! Or at least if you believe the legend that has built up around this group of roughly 18 to 35 year-olds. To capture their attention a communication should consist of no more than 140 characters and preferably contain three or four emogis to sustain their level of interest.

They have grown up in a fast-changing world of high technology, global connectivity and access to instant information on every subject under the sun, not necessarily accurate information!

 

For millennials, today’s pressures and opportunities take priority

It is said that millennials are far more concerned with the present than the future and would rather spend their money on reducing student debt and travelling than save for a house or pension. Of course their opportunities for travel are far greater and cheaper than they were for previous generations. But access to property ownership has become much more difficult.

They nevertheless are concerned about what is happening in the world and are not happy with what the ‘baby-boomer’ generation has done to the planet in terms of pollution and destruction of the natural world. Hence their disdain for the status quo. They are very conscious about climate change, the environment and the way countries and industries are governed.

 

How do they handle their financial planning?

By and large they don’t! They enjoy spending money and are sceptical about the value of saving as they have seen the hardships their parents went through to save for the future, sometimes with questionable results. Retirement pensions are very low in their list of priorities. Which is unfortunate because they are going to face the same as the rest of us when it comes to surviving in old age. And it could be a lot worse due to demographics; the retired         population of developed nations is going to be much greater than today and there will be fewer in the workforce to support them. Social care and support as it exists in western countries today can only get worse as governments struggle to balance their budgets.

Another interesting fact has emerged in a recent study in the UK. It found that 16-year old school leavers were more literate regarding financial matters than those in the millennial age group. The reason for this is that a decision was made in 2014 to include personal finance in school curriculums (curricula if you are a Latin scholar).

 

How can we best communicate with millennials?

I ask this because I have frequently had parents ask me to talk to their adult children about the importance of saving and providing for themselves in later life. The parents were concerned because they themselves saved hard when they were young and know how important it is. How much they made by way of profits was irrelevant; the priority was to get into the habit of saving. If piggy banks were impossible to break into they would help to achieve the objective but piggy banks are not a good long term solution; that’s why regular savings plans with their stick and carrot policies and compound growth are more likely to help them to build wealth.

Millennials are not keen on face-to-face meetings and detailed factfinds. Which is unfortunate because regulators impose an obligation on advisers to conduct such exercises prior to giving any advice. Millennials are probably more inclined to turn to the less personal and less intrusive service of so-called RoboAdvisers over the Internet. Certainly that is a cheaper route to go in terms of charges. But it is also a dangerous path to follow and there would be little or no help available if things went wrong.

We have already established that millennials do not have much disposable income, except perhaps for travel. An immediate example is that of one of the newly-elected members of Congress in the US, a millennial Alexandria Ocasio-Cortez who said she could not afford to pay her first rent in Washington until she gets her first pay cheque. In fact, in the US and probably elsewhere millennials’ income in real terms is substantially less – as much as 40% – than what their age group enjoyed a generation ago. In those days qualified young people were in short supply so competition for them pushed up their earnings. Today, there are so many universities churning out large numbers of graduates that only a relative few can immediately command salaries in the real terms of yesteryear. Which makes it even more important that they start to face the realities of what lies ahead.

 

Possible solutions

Somehow we have to learn to communicate with millennials a little differently. That doesn’t necessarily mean via Facebook (which I don’t subscribe to) or by sending short messages by WhatsApp. But perhaps we need to make the message simpler and try to cut out a lot of the gobbledigook that makes financial planning look so difficult.

For example, instead of giving a long presentation on the merits of saving for retirement and trying to convey a huge amount of detail about the various plans available it might be better to offer a simple formula like the following:

  1. At what age will you start saving for retirement?
  2. Halve it
  3. This is the % of salary you should be saving

Example: At age 30 it would be 15%

Wait till 50 and it is 25%

The above is within 140 characters and although there are no emogis it might be sufficient as a rough rule of thumb to start the thinking process.

Other aspects of financial planning such as investment strategies and life insurance can similarly be presented in brief as a starter.

This strategy however is intended only to capture their  interest. Much of the detail must still be conveyed and understood but capturing that initial interest is the first   challenge.

The recommended level of savings could exceed amillennium’s budget and not figure high on a list of priorities. Unpalatable sacrifices may be necessary but at least an attempt will have been made to present the facts – and the choices.

Of course, we post-millennials made all the right choices when we were in that age group, didn’t we?

 

Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at : colin.bloodworth@ppi-advisory.com or +62 21 2598 5087.

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