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Client Service April 10, 2023
Strategies for Advisers to Approach Financial Literacy With Younger Workers
In honor of National Financial Literacy Month, PLANADVISER spoke with experts on how advisers can customize goals to fit the needs of younger workers.
Reported by Natalie Lin
Younger workers often overlook the importance of learning about retirement savings, deterred by their own short-sightedness. To help, experts recommend that advisers meet young workers where they are’ and customize goals to fit their needs.
With April designated as Financial Literacy Month, PLANADVISER examined the obstacles of educating younger workers on retirement savings and asked experts for their advice on how to best reach this age group.
Overcoming Obstacles
Vince Shorb, CEO of the National Financial Educators Council, says young workers are often preoccupied with their urgent interests.
“They’re so focused on their near-term realities,” he says. “How am I going to move out? How am I going to be independent? How am I going to pay my own bills? How am I going to pay off college debt? Is there a job for me?”
When teaching retirement concepts to young workers, Shorb recommends that financial professionals include those short-term priorities in their training. Prior to any type of financial education programming, educators can survey students about what they want to learn.
“It’s not the adviser deciding what the students would learn. The adviser is listening to their needs, listening to their concerns, and then putting a program together on that,” Shorb says.
Ken Cella, principal of branch development at Edward Jones, says short- and long-term goals should not be mutually exclusive, touting his firm’s educational curriculum, Financial Fitness, as an example.
“It can be challenging for younger workers to focus on taking responsibility for their retirement when there are more pressing financial goals,” said Cella in an email response. “What we have learned through our work with Financial Fitness is that the most impactful efforts are designed to address financial literacy topics for both short-term and long-term goals simultaneously.”
He also notes that younger workers are often on the move and may not have as much time to dedicate to sitting down and educating themselves.
Another challenge Shorb has come across when approaching young adults: They often become sidetracked by investments they heard about from media or social networks.
“When we’re doing college programs [or] we’re at high schools, it’s always, ‘Tell us about crypto, tell us about this investment, tell us about Gamestop,’” says Shorb. “It’s always turning them back around, saying, ‘Hey, that’s one potential investment for you, but you need to have money first.’ Let’s go back to [looking at] long-term strategy, investment risk and helping them with their risk profile.”
To avoid potentially unsound investments, Shorb emphasizes teaching risk management strategies. One activity he implements is helping students learn about their own financial psychology, to understand what they are comfortable spending and saving on, which can help them create their risk management style.
Key Financial Literacy Advice
To keep young people engaged, Shorb recommends advisers teach with different learning methodologies.
“If somebody’s talking for 60 minutes, that’s absolutely incorrect. That’s how you’re going to turn people off,” he says.
Shorb tries to mix up his teaching styles. One approach may be to give students a more reflective activity in which they think about the future. He recommends another activity in which students give advice to others through a case method approach, sometimes including celebrity case studies to keep things interesting.
Another piece of advice Shorb offers is for advisers to integrate financial education into their model. “For a financial behavior realtor, financial adviser or CPA, financial education is a key aspect of financial wellness,” he says. “I think if they incorporate that into their brand, it can open a lot more opportunities.”
Shorb also strongly believes in working with multigenerational clients. He holds personalized consultations for clients and their kids so he can build a relationship across generations and provide a wholistic education for the family.
Fundamentals of Retirement Saving
Younger workers should begin taking on the fundamentals of retirement savings, Cella recommends.
“With the rise of inflation, saving for retirement may not be top of mind for many, especially younger workers,” said Cella. “But it is a great time to improve your retirement health or just kick-start it.”
He suggests sticking to a budget, matching a company’s 401(k) offering and increasing contributions by at least 1% annually. If a worker does not have a retirement plan through an employer or is already contributing the maximum amount, one way to increase retirement savings is by contributing to an IRA.
“At the end of the day, we see first-hand the confidence that can come from a higher level of financial knowledge,” said Cella. “The best way to help clients achieve their goals is to understand how the decisions they make today will make their goals a reality in the future. Any financial literacy lessons you can provide clients and their families will help them on their financial journeys.”