Industries

Money management for millennials

Virginia financial advisers learn to adapt in serving their Gen Y clientele

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Print this page by Tim Loughran
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Christopher Krell (left) and Justin Harris
of Cassaday & Co. Photo by Mark Rhodes

The great majority of Generation Y adults are still a decade or two away from opening individual investment accounts, but millennials already are changing the financial services industry, say money managers across Virginia.

Millennials have a growing reputation for being more disciplined savers than their baby boomer parents, and they insist on being offered increasingly sophisticated mobile communication technology tools to monitor and manage their retirement nest eggs.

Millennials are disparaged as largely a generation of lazy, videogame-playing slackers still mooching off their parents with no interest whatsoever in financial markets and retirement planning. Financial advisers across the state, however, paint a different picture altogether — making sure to draw a distinction between wealthier GenYers who have enough financial resources to employ financial advisers and the vast majority who, struggling to pay off tens of thousands of dollars in college debt with low-wage jobs, cannot.

“You hear a lot in the media that millennials don’t own stocks, that they don’t believe in the stock market, they think it’s rigged,” says Justin Harris, a principal with Cassaday & Co. Inc. in McLean. “I, from real world experience, do not find that at all. Millennials who have been educated properly by their parents, they understand the benefits of long-term investing.”

His fellow principal at Cassaday & Co., Christopher Krell, adds that the wealthier segment of Generation Y also understands something many of their parents did not.

“The fundamental thing is you have to save for a long period of time and [my millennial clients] are excellent at that,” says Krell. “They get it in their 20s, whereas a lot of baby boomers did not get that in their 20s. They started to pick that up in their 40s.”

Investment building blocks
Unanimously, financial advisers say they advise their youngest clients to first build a base of savings, in both workplace retirement plans, like 401(k)s and 403(b)s
and in the bank, before using any cash for additional investment plans. 

“When people are starting to build up their money, we first advise them to take advantage of the 401(k) plans they are offered at work,” says Michael Joyce, president of JoycePayne Partners in Richmond.

“Second of all, we suggest they set up an emergency fund, or six months of expenses, because their job could go away, they could decide to go back to grad school, any number of things could happen … Once they have this emergency fund set aside and have enough for their short-term goals (like buying a house) then we will recommend they invest more aggressively and more appropriately for their time horizon.”

As they embrace the traditional wealth-building formula in ways many of their parents did not, millennial investors have turned to new technological tools to monitor and manage their wealth.

In years past, Joyce would use paper reports and the Postal Service to communicate with his clients in a “slow and immersive” style aimed at educating them about good and bad investments and long-term strategies. Now, his younger clients prefer what he calls a “fast and interactive” style of communication delivered via a variety of communications platforms.

“I do see a greater impatience” from Generation Y clients, says Joyce. “Not so much results-oriented, but faster information-oriented.”

Providing apps
Greg Popera, a private wealth adviser with Merrill Lynch in Tysons Corner, says Generation Y’s need for speed and low-cost investment tools and its ingrained cultural mistrust of what he calls “Big Finance,” has led to the rapid rise in “robo” investment apps, which millennials can access from their laptops, smartphones and home PCs.

He says financial advisory firms must “provide applications that [millennials] can use on their own: apps that can help them calculate their Social Security benefits for example, the what-if scenarios, like college-planning.”

The idea, says Popera, “is to bring that old, stodgy financial institution down to the ground level with this next generation.”

Cassaday & Co.’s Krell agrees. Millennials “are uber tech-savvy,” he says. “We have to deliver the apps. We have to fight for space on their phone. Because that’s where they get all their information from.

“We have to have all the technology in order to support that. Their grandparents and the baby boomers, quite honestly, are evolving that skill set, but a lot of them still prefer to get everything on paper. The millennials don’t want that, they don’t really believe in that.”

Avoiding hackers
In spite of their love affair with mobile technology, millennials recognize its shortcomings when it comes to something as complex as managing a financial portfolio and as sensitive as protecting the confidentiality of their personal financial information, says Popera of Merrill Lynch.

“The younger generation is becoming more and more aware of hacking and the importance of their personal information,” he says. “Some of these applications increase the odds of something bad happening, whereas the face-to-face personal interaction [with a financial adviser] during a portfolio review — that’s not very hackable.”

Cassaday’s Harris says his pitch to millennial investors who say they’d rather use computers to manage their retirement portfolios is simple.

“The major difference between us and a robo kind of adviser is that we have a much more personalized approach to build and customize a portfolio,” he says.

“I try to explain that if they are OK with something that is very cookie cutter and very passive and have extremely low costs and not having good customer service, then they should use them,” Harris says.

“But if you want something more personalized, something more active, that’s going to be more hands-on in terms of our fine-tuning of the portfolio, have access to an entire suite of financial planning that we provide and as you and your family grow, then we may be a better option. It will be slightly more expensive, but like everything in life, you get what you pay for.”




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