Before tackling debt, clients need basic cash-flow management assistance, says Tyler Landes, founder of Kansas City, Mo.-based Tandem Financial Guidance. “Young couples want budgeting help; they’re starting to make higher income but want to get their ducks in a row.”
The planning process doesn’t change for lower-net-worth clients, Silveira says.
“They’re worried about insurance protection, buying a home and saving for education,” Silveira says. “At this stage, it all has to do with cash flow. They need funds for insurance premiums and down payments.”
Wrenne starts clients on a guided cash-flow management plan.
“Budgeting is time-consuming, so I use a simple system,” Wrenne says. “They document how much cash they had at the beginning and end of each month, and then document how much money came into the account. I have people tell me how much they think they’re spending. We back into their actual spending, and it’s always higher than they estimated.”
Millennials are concerned about short-term goals like tackling debt, says Wrenne. Because of regulatory changes, student debt management is more involved than mailing a monthly payment.
“That’s how it used to be, but it’s become ridiculous,” says Wrenne. “There are eight repayment options, different loans and services, different forgiveness programs; those programs tie into your taxes differently. There are different refinancing companies, and rates have increased. Debt’s complicated.”
Firms with the XY Planning Network, whose clients are usually made up of at least 50 percent millennials, assets under management can be a cringeworthy, or negative, number.
“I joke that I manage as much debt as assets—probably even more [debt],” says Bera. “People have to figure out their student loans, but a lot of planners don’t have a clue how to work with debt. It’s a great opportunity.”
Advisors can also add value with education planning. Millennial parents are aggressive education savers. According to a recent Fidelity study, 71 percent of millennials save for their children’s education, and half plan to cover the full college cost.