Advisers Have Much to Offer Millennials

Prudential notes the leading half of the Millennial generation, a category roughly corresponding to Americans age 25 to 34, are quickly progressing towards their prime earning years and are at the stage of their lives where they are experiencing major life milestones.

Prudential says it was not surprised its survey found many Millennials’ long-term financial planning needs are overshadowed by the need to think about more immediate events—such as getting married, buying a home or having children. In many cases, perceived costs contribute to a reluctance to engage a professional to help create a sound approach to spending and investing.

“A common misperception is that hiring a financial professional is expensive or that you need to be wealthy to work with one,” says Caroline Feeney, president of Prudential’s national career distribution system. “But there are different types of professionals that can help you whether you’re just starting out or nearing retirement.”

Prudential says advisory firms that do more than offer pure investment advice have a lot to offer Millennials. Services Millennials say they are most interested in include help analyzing employee benefits, help developing a system to manage budgets and cash flow, and help planning for major purchases. These services can be offered for a flat dollar fee that is attractive to Millennials, but advisers have to set a reasonable scope of service that can be delivered efficiently. Advisers may even be able to turn to their service provider partners to bring call center or web-based resources to bear to efficiently support this lower-balance but promising market segment.  

Many Millennials are looking for better ways to manage and control debt, Prudential notes. Whether grappling with student loans or credit card debt, an adviser can help prioritize what Millennials pay first or how to consolidate debt to lower interest rates. Showing clients the importance of reining in discretionary spending can often go a long way towards reducing debt and boosting savings, Prudential observes.

Reducing discretionary or fixed expenses likely means establishing a budget. Although many Millennials are aware they need a budget to maximize their financial performance, Prudential says it is not uncommon for them to report a very loosely structured budget or no budget at all. 

While Millennials are increasingly turning their focus to retirement savings and leveraging employee benefits like 401(k) plans, Prudential suggests advisers can first help them establish a liquid emergency fund. Financial professionals typically recommend saving enough to cover three to six months of fixed living expenses like rent, utility bills and car payments. Helping clients create this type of immediately available backup savings substantially improves the chances they will stick to a regular retirement savings program, Prudential says. The client will be prepared if they get hit with an unexpected expense or if they lose their job, and they won’t have to turn to credit cards or loans to cover their bills.