A July 2018 report, entitled The Generation Game, indicates that more than 11 million 25- to 45-year-olds in the UK are expected to receive an inheritance from their parents or grandparents within the next 30 years; 5.1 million of these individuals expect to inherit £50,000 or more in fixed assets or cash. However, they might be banking on this windfall a little too heavily.
The report notes that four in ten of the under-45s surveyed are anticipating an inheritance, but have not yet discussed the specifics with the gifting party, and a third admit that they are delaying saving in anticipation of their inheritance. There’s a strong case here for professional financial guidance but many likely won’t seek it, or will hold off on doing so. Research released by insurer Prudential in August 2018 finds that just 26% of millennials see a financial adviser regularly.
According to a 2015 press release from Unbiased.co.uk – regarding its report titled Value of advice – the optimal age to receive financial advice regarding retirement is 25 – but most tend to delay this conversation for a further ten years. The study indicates that those who consult with a financial planner early in their careers tend to save more and have more realistic expectations of how long their retirement years will last. Furthermore, individuals who work with a financial professional can help to safeguard against some of the mistakes committed by DIY investors: from buying expensive products to overpaying on their taxes or obsessing over short-term performance.
The need for professional financial guidance was further underscored by a study on levels of financial literacy, released in March 2018 by UCL and the University of Cambridge, that finds adults in England and Northern Ireland perform worse on basic financial literacy tasks than their counterparts in most other developed countries – even when provided with the opportunity to use a calculator.
It’s no secret that millennials are, for the most part, more tech-oriented than generations past. The advent of smartphones has facilitated a shift in how younger generations engage with financial services – 46% of UK millennials are keen to use their mobile phones to conduct all their financial planning, according to the 2018 Legg Mason global investment survey – and this is something that financial planners should consider. Those without a mobile-optimised website, for example, can expect eye rolls at best. Millennials crave convenience and demand always-on access, and that’s a reality financial planners need to plan for as they tailor their service proposition.
However, cost (or perceived cost) deters many young adults from seeking financial advice. When quizzed by Dabbl – an online share trading platform – about their attitudes towards investing, 62% of millennials claim that their reticence to establish an investment portfolio is driven by a belief that investing is solely the domain of the wealthy.
This confluence of factors – the appetite for expert input, affinity for mobile-centric communication and desire for affordability – highlights a need for financial planners to be creative with their pricing to capture the next generation of clients. Younger financial planners already have their fingers on the pulse of their peers’ needs and are increasingly serving them via a fee-for-service model. In his article ‘How to profitably price fee-for-service financial planning’, Alan Moore CFP®, co-founder of the XY Planning Network, says 62% of millennial advisers are using this model.
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