The millennial generation’s attitudes toward work and money differ from those of their boomer parents, so why shouldn’t they have different advisors who “get” them?
That is one of the questions that drove one industrious Gen Y entrepreneur, Alan Moore, to create a financial planning solution for Gen X (whose oldest members are now pushing 50) and Gen Y savers — the aptly named XY Planning Network.
The energetic 27-year-old, whose accomplishments exceed his years, co-founded the rapidly growing, 10-month old network with advisory industry thought leader Michael Kitces as a sort of virtual home for “pissed-off junior planners,” as he put it in a phone interview with ThinkAdvisor.
“They want to work with younger clients; they want to do financial planning,” he says of the 60 constituent firms that XY Planning Network has amassed since its April launch.
What keeps most advisors who value financial planning from practicing their profession is what Moore describes as a broken and conflict-ridden business model built around products and sales.
“Our business model is a total restructuring of the way that financial planning is delivered,” says Moore, whose planners charge a monthly subscription fee so consumers can pay for financial advice the way they pay for their cell phone and utilities.
Moore, who has run his own successful planning firm catering to millennials, and that after working in a traditional RIA catering to wealthy clients, decries the commission-based compensation, with its product emphasis.
But he is also critical of the fee-only RIA model, where the advisor’s fee is based on assets under management. That model, he argues, incents advisors to seek out wealthy clients, or to make them wealthy, encouraging them to work, save and invest even when they might be better off working and saving less but consuming more.
“Our focus is on our clients’ income, on helping them live great lives — not making sure I get as much of their money into an IRA as possible because my retirement plan is getting rich [through AUM fees],” Moore says.
Interestingly, the Georgia native, now resident in Bozeman, Montana, says peers who ask what he does professionally typically have a hard time understanding what financial planning is, so he makes it simple for them:
“If I was to define financial planning for you, I would say it’s helping clients live great lives. Ultimately that’s what we do,” he says.
But Moore says older and younger generations have different views of what that means.
In a recent blog he posted on Time magazine’s site, the young advisor, all of whose clients are under 40 as well, says one can’t talk to millennials about “retirement.”
“That’s something that’s not going to happen for 30 more years. It’s just hard to connect with,” he says, adding that he has seen eyes glaze over when (formerly working at a traditional wealth management firm) he handed young clients a Monte Carlo simulation showing they’ll one day have $30 million with a 70% chance of success.
“It really requires a restructuring of the conversation. It’s part cultural, part generational, part their age. They don’t want to talk about working their tail off so one day they do not need to be working anymore,” he says.
Rather than retirement, which does not resonate with millennials, Moore talks about financial independence, which does.
“My parents [who are 57 and 53] are still trying to figure out what I do for a living,” he quips. “I don’t’ have a single job; I don’t go to same office every day,” the expected routine of boomers whose model was to work a full-time job and then retire.
For members his generation, in contrast, a “side hustle” with Uber or TaskRabbit to bring in extra money may be preferable to a full-time job they may not want for the rest of their working lives.
What’s more, millennials “don’t trust the job market like our parents did; they know they’re going to get laid off or try [new opportunities]; they saw their parents rely on a dual income and then kind of get screwed [when one spouse lost a job but still had to pay a mortgage],” for which reason Moore says it’s common for millennials to live on one spouse’s income while saving the other’s.