What younger clients want from financial advice

How do young people feel about money?

When it comes to money matters, young Americans are a mixed bag. On the one hand, it’s clear that not all young people are confident when it comes to managing their money effectively.

In fact, only 46 per cent of Gen Z feel confident about their financial knowledge, noticeably less than previous generations.

And having lived through the Great Recession, pandemic and subsequent inflation surge, it’s easy to understand why so many young people lack confidence.  

But this doesn’t mean young people are entirely uninterested in their money. For example, 45 per cent of Gen Zers reported they have an advanced understanding of money saving.

And when it comes to investing, this confidence is even more pronounced with 54 per cent holding some kind of investment.  

But while confidence levels vary, younger Americans are set to inherit as much as $68 trillion in what is being termed ‘the great wealth transfer’.

As wealth slowly begins to be handed down, young Americans lacking confidence and knowledge are being set up with poor money management skills that could potentially threaten their future financial security.  

Why are habits changing?

Young Americans don’t just have varying levels of confidence and understanding when it comes to their money — they also use their money differently. 

Where older Americans were far more used to a cash-based society, Gen Z are equally comfortable using digital bank transfers to do their spending.

As a result, they are much more willing and open to using digital solutions and apps to help manage their savings and investments.  

Young Americans also need to manage student debt repayments as one of their immediate financial priorities.

Among students who took out loans, the average repayment amount is around $20,900.

And while the cost of living has surged over the last couple decades, younger Americans have had little in the way of equivalent pay rises.

In fact, American Gen Zers have 86 per cent less purchasing power than baby boomers did at the same age.

only 46 per cent of Gen Z feel confident about their financial knowledge

What do young Americans want to know about money?

So with young Americans using their money differently, how can financial advisors understand the needs and wants of younger clients?  

1. Technology is key 

From banking to investing, technology is changing the way young people understand money.

From challenger, digital banks that are run entirely virtually to apps that invest leftover dollars into stocks and shares, digital apps are helping people understand and use their money differently.  

The FinTech sector is growing rapidly, and there are more useful financial apps coming onto the market each day.

These apps help young people see and manage their money in real time from anywhere in the world.

This convenience is particularly appealing to young people looking for easy and simple ways to manage their finances.  

Not only this, but many apps also contain useful features that make it easier to budget and save towards different goals at the same time.

So while advisors don’t need to be familiar with every financial app on the market, understanding the ways that apps have made money management easier and more convenient is important when it comes to attracting younger clients.   

2. New assets 

With low interest rates persisting for decades, investing in traditionally safe asset and investment classes no longer offers the returns needed to materially improve the lives of many young people.

So much so young wealthy Americans have lost confidence in major stock markets and are instead favoring investments in alternative assets.  

For instance, younger investors have proven far more willing to invest in cryptocurrency than older generations.

Americans between 21 and 42, for example, are 7.5 times more likely to buy cryptocurrencies than older investors. 

When they invest, young people are also keen to ensure their money is going towards sustainably minded businesses.

Interest among millennials in sustainable investing has been growing, with 19 per cent of Gen Z and 16 per cent of Millennial investors now directly taking environmental, sustainable and governance (ESG) issues into their investment decisions.  

So from sustainable investing to exploring new and alternative assets, financial advisors should ensure they can give good advice when it comes to alternative investments that appeal to younger age groups, as well as offering better returns.

However, the importance of safe investing speaks for itself, and while younger people are more willing to make higher-risk investments, the importance of stability should also be highlighted to younger clients.  

3. Retirement planning 

Despite challenging conditions, young people are still planning to retire early.

As many as 70 per cent of Gen Zers are saving money for retirement, with 82 per cent of Millennials and 84 per cent of Gen Xers doing likewise.  

Retirement and saving money for the future is a key priority, so expect your younger clients to be seeking information about the best ways to save for the future.

For many clients, they will be looking for more information on savings accounts like a 401k or an IRA, while others may want more practical day-to-day advice about effective budgeting. 

4. Credit woes 

Figures from the Federal Reserve show that while credit card delinquency rates have risen for American adults of all ages, they have been particularly noticeable among Americans aged 19–24.

Driven by the difficult circumstances of the last couple of years, many young Americans have turned to credit to meet their daily expenses.  

While this may offer a short-term solution, it can leave people exposed to long-term credit damage if they fail to plan appropriately.

Many of your younger clients will be looking for guidance and advice on how to improve their credit scores, pay down their debt and use credit in a safe way.

Young Americans are looking for financial advisors who can help them meet their financial goals. Find your next client with Unbiased.