Financial Education & Millennials – Laying the foundations for potential clients

BY Niall Auburn, Marketing Specialist - CRM Wealth Manager
September 27, 2017

Millennials are a trending topic for Financial Advisors – for good reason. They are slated to become the biggest demographic in history and hold the keys to tomorrow’s wealth. Yet while millennials are set to succeed in the workforce, with the highest levels of educational attainment ever, a recent study published by the National Endowment of Financial Education and George Washington University found they lacked financial capability. Only eight percent of surveyed millennials showed high levels of financial knowledge, while just a quarter (24 percent) demonstrated a basic understanding of how to manage their money.

Are millennials really that bad with money?

It’s easy to read too much into these results. But they demonstrate millennials, taken as a group, haven’t thought much about investing – even as they continue to report ambitious financial goals. While this may be worrying, it also creates a golden opportunity for financial advisors. Investing effort into teaching millennials financial basics can go a long way to securing their loyalty as clients – and acquiring some of the $30 trillion they’re expected to inherit over the next three decades.

There’s no reason to think millennials are any less capable of being good clients than older generations.

Despite internet chatter about eccentric spending on things like avocado toast, millennials don’t spend more frivolously than other generations. A study by Bankrate found millennials spend a lot less on vacations and more on bills – and modestly more on things like eating out. Cell phone bills, a necessity today, also ate up some of their monthly income.

However, Nick Molnar, managing director of payment services company Afterpay, said, “our research and experience suggests millennial stereotypes are wrong. Millennials are in fact money-wise, financially disciplined and clear about spending commitments.”

Millennials are financially late bloomers

So what’s behind survey results showing poor financial aptitude among millennials? Partly, it’s how questions in these studies are framed – to evaluate millennial knowledge about investing. In this narrow regard, millennials may be late bloomers, having dived into post-secondary education – widely seen as essential to succeeding in today’s hyper-competitive job market. Three quarters or 75 percent of millennial women and 65 percent of men took some post-secondary schooling (Environics, 2015). That means many have taken on heavy student debt and delayed family formation, each bearing on one’s immediate financial priorities.

Indeed, in a recent study by BMO Wealth Management, most millennials said they weren’t thinking about retirement much right now. Rather, paying down debt was the most pressing financial priority (23 percent) followed by finding meaningful or better paid work (17 percent) and purchasing and upgrading a home (16 percent).

Anywhere between 17- and 34-years-old today, Millennials have less wealth and higher costs than their parents at a similar age. Plus, at least 70 percent have one or more source of long-term debt. Many millennials, however, are also entering prime earning years. They may have just bought a home – or they’re thinking about starting a family (if they haven’t already). As millennial clients build wealth and make big life decisions, they will need good financial advice to help them manage their complex balance sheets.

Reaching out to millennials

Expending a little time and effort teaching millennials finance 101 can help forge profitable, long-lasting relationships. Break the ice by explaining the basics of RRSPs and TSFAs. If you’re feeling more ambitious, try running a seminar or workshop on financial management.

Finding these clients doesn’t require building an ultra-trendy viral marketing campaign. You likely have an untapped pool of millennials in your contact list – children of existing clients. A CRM pre-configured for finance, with built-in household structure, lets you easily identify potential new clients and keep tabs on important milestones, like birthdays.

With a little empathy and patience, you can win the trust of millennial clients and grow the value of your portfolio. Start planning your millennial outreach today by checking out our e-book on what to say and how to say it to this rising demographic.

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