By Dennis Hung • July 20, 2018•Careers, Other Career Issues
Financial news reports don't always mention Millennials prominently. Other than stories of young persons driving tech stocks up and supporting the market with spending, Millennials and finance don't seem to go together. Just because the news doesn't wholly report on something, however, doesn't mean nothing occurs. Millennials, like other people, do want to maintain financial security. While the young aren't always known for fiscal prudence, a decent number of young people understand the best way to plan for retirement involves planning as early as possible. Speaking with a financial adviser does help the cause of safeguarding and growing money.
With Millennials comes certain attitudes. Financial advisers, while happy for these young people's business, do learn the Millennials do things a bit different. Amazingly, Millennials bring a bit of disruption to the financial advisor world.
The Ups and Downs of the Market
In 2017 and 2018, the Dow Jones hit extraordinarily high numbers. Millennials took note of the wealth generated by the market. Average annual returns on various mutual funds alone returned above-average percentages. Not everything turned out to be perfectly rosy. The emergence of global trade wars lowered the Dow. Stock values tumbled. Such an up and down landscape probably led many Millennials to realize they should look towards the advice of a professional before making any decisions. They don't want to lose what they stand to gain. A glimpse at the "inheritance situation" shows a lot of money will soon transfer to a younger generation.
An Inheritance Boom
Trillions of dollars in inheritance wealth exists. Generation X and Generation Y eventually plan on passing down wealth to their Millennial offspring. Gen X and Gen Y stand to receive trillions in Baby Boomer inheritances. With so much accumulated wealth headed to Millennials in the future, no one should be shocked young persons take financial planning seriously. Financial planners do need to prepare themselves for specific complexities Millennial bring with their business. And Millennials may be coming to ask financial advisors for assistance in significant numbers.
Looking for Advice
Responsible young persons realize inherited wealth must be managed appropriately. Otherwise, the money won't last. The benefit of receiving a sizeable inheritance involves making a lump-sum investment to grow money over time. The retirement savings for a Millennial could turn a large inheritance into massive wealth through 30 years or more of steady compounded interest.
Choosing the right mix of assets for investments takes careful thought. A financial advisor could prove helpful here. Young persons can accept a little more risk with a small part of their portfolio. Options for a covered call with targeted options trading remains a possibility.
Choosing conservative vehicles for other segments of the portfolio helps balance riskier assets out. Working with an advisor allows for developing the right asset mix. Questions may arise about how actually to pay the advisor. Millennials aren't entirely fond of the current pay structure.
Leery About the Commission Model
Financial advisors don't work for free. Their payment comes in the form of a commission. Millennials don't seem to willing to pay for commission-based services. A preference for a flat fee may be universal among large numbers of them.
At present, Millennials won't be able to change the fee structure found in the financial advisory industry. The limits of influence could change in the future. As Millennials grow older and become the primary clients of financial advisors, their potential to alter fee structures increases. All it takes would be a small segment of the financial advisor industry to switch to a non-commission approach to payment. Millennials may then choose to take their business to the non-commission fee-based providers. A wariness of commissions could lead to a considerable change in the industry. The commission-based arrangement might reflect the means in which only a fraction of financial advisors bill clients.