From the April 2017 issue of Investment Advisor • Subscribe!

Millennials’ Financial Education Needs Not Much Different From Boomers’

Your future clients face many of the same challenges as your current clients, but approach them with a different perspective

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Millennials aren't facing financial education issues that are profoundly different from what their parents faced, according to Veena Khanna of Key Private Bank.

“As they’re maturing, they want to learn the same things that you and I and others needed to learn as we matured out of high school and then into college and got our first jobs,” the bank's director of wealth advisory services said in an interview. Budgeting, cash flow management and credit management are just as important for millennials as they were for boomers and Gen X, she said.

What millennials do with that education and how they interact with financial professionals, however, will distinguish them from their older counterparts, Khanna said. Millennials “have a different value system” from older investors, which will “drive whether or not financial advisors or wealth management firms will be able to attract and retain the millennial population.”

Millennials’ view of wealth accumulation is different from their parents’, Khanna said. “They’re incredibly concerned about the communities they live in. They’re do-gooders […], and some of that will play into how they think about their own wealth management.”

Millennials also have different expectations around privacy, Khanna said. They’re more open on social media, and are more influenced by group think, which “will force us as wealth managers to think about training and coaching them in a different way.”

She believes millennial clients will “gain more from their peers in a group-think environment.” Their reliance on peers and general tech savviness will probably drive advisors’ engagement efforts toward social media, she suggested, and “pushing out content to them as an affinity group and allowing them all to consume it together and opine on it in an open forum.”

Bring Millennials Into Legacy Planning

Millennials’ reliance on peers presents a challenge to advisors trying to connect with younger clients, as few advisors fit into that peer group. “As unfair as it may be, this particular generation pays more credence to younger advisors,” she said. “This is primarily due to technology credentials; if the advisor can't talk technology then they may be at a disadvantage.”

In addition to building up their tech expertise, firms should bring in some younger advisors “to tag team and to learn and to start dealing with the younger clients,” Khanna suggested.

That's important because in high-net-worth families, adult children are more likely to be driving money conversations than their parents, a survey by Key Private Bank found.

Almost three-quarters of advisors surveyed said their clients weren't consistent in having discussions with their children about money. Two-thirds said their clients weren't actively engaging their children and weren't transparent when it came to financial issues.

“As we’ve been dealing with the older generation, we know what their thoughts are around educating the next generation. We also occasionally have the opportunity to talk to that next generation that will be the inheritors of wealth and we know what they’re thinking,” Khanna said.

However, there's a disconnect. “The parents generally are thinking the next generation is going to squander the funds, and they’re not ready [...] to be transparent with them.”

She continued, “what the millennials are telling us is that they have a need to know; they have a need to be educated, just like past generations were, on how to be responsible stewards of that money.”

Key Private Bank's family wealth practice launched a legacy planning service about a year ago, Khanna said, where the bank dedicates a full day to planning with clients. “We talk to the family ahead of time. We plan out an agenda,” and when the family leaves, they’re “in a better state of mind because they realize this generation isn't going to just squander the funds.”

The children “are thankful that we brought them together because they get a say-so” in how family money is spent.

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