Young adult clients between the ages of 18 and 34, also called “gen-next” clients, have the same desire to retire as those who came before them. But there’s a twist: They want to do it earlier. Yet they’re also currently focusing more on other financial goals besides retirement, according to a report recently issued by Edward Jones.
According to 200 financial advisors who participated in a study conducted by the firm, these clients want to retire at 61, which is about three years earlier than those of other generations do. However, unlike those in other cohorts, they are not just saving money for retirement.
Instead they are focusing on other priorities. Thirty percent of advisors reported that their clients in this cohort are planning for a family, while 28% said their clients are focusing on being responsible with everyday expenses, and 23% said these clients want to invest.
“The great thing is that we found that Gen-Next still buy into a lot of the same traditional American ideas of success and the American dream, but they’re a little different,” said Nolan Jeter, a financial advisor at Edward Jones. “They do want to retire like most Americans, but they want to retire earlier than previous generations.”
The report follows an earlier study of more than 2,000 investors between the ages of 18 and 34. That study found that only 12% of these investors talk about their finances with an advisor. And their money situation was a major obstacle to them reaching out: 68% of these younger investors thought that they did not have sufficient income or savings to speak with an advisor, according to the earlier study.
“There’s a bit of a disconnect between what they want to achieve versus how they are working toward it today and leveraging help today to reach those goals,” Jeter said.
He referred to them as the smartest generation the nation has ever seen—noting that one in every three has some college education and one out of every four has at least a bachelor’s degree.
To gain access to those investors, Jeter suggested advisors take two main tacks: The first is to start early and start reaching out to them through their parents, who might be current clients. Advisors should start incorporating them as part of their parents’ standard client meetings.
The second method is through education, teaching clients about basic items such as what a mutual fund is and how to best save for retirement.
“When you lead with education, [next-generation clients] understand what their role is,” Jeter said. “They understand what your role is, they understand how this all works, and [that] also makes things a lot easier for everyone involved down the line.”
Younger adult investors are looking for a financial coach, Jeter said. They want someone who will help them change how they think about finance. A financial coach can help them turn to 401(k) plans and talk about budgeting their money.
But advisors can also connect with these clients in other ways, such as through online portals and educational seminars.
What advisors should not do is make any assumptions about these clients before speaking with them.
“The biggest thing I think an advisor can do is not put a Gen-Nexter in a preconceived box,” Jeter said. “We need to do a great job of listening with Gen-Nexters because they have so many options and they have been exposed to so much.”
One thing advisors make assumptions about is the amount of time these younger clients want to spend interacting with an advisor in person. The previous study on young adults found that 66% prefer in-person interactions with their financial advisors.
“That preconceived notion that they just want to do everything from their laptop or their phone screens is not actually true,” Jeter said. “They do want one-on-one interactions with their financial advisor [and] they want a one-on-one coach to guide them through the journey of financial planning.”