As millennials and members of Generation Z consider their financial futures, they aim to save like previous generations. However, they face a challenging economic environment, marked by two major downturns.
Erika Kullberg, founder of Erika.com and a personal finance expert with over 21 million followers on social media, said she isn’t surprised by the growing wealth of younger generations. “Millennials and Gen Z are actively seeking ways to grow their wealth through various strategies, even while dealing with significant challenges like student loan debt and stagnant wages as the cost of living rises,” Kullberg wrote in an email to Financial Planning’s Tobias Salinger.
Kullberg observed that many younger people show a strong entrepreneurial spirit and a desire to explore alternative paths for financial growth. “They are using technology and digital platforms to start businesses, invest in stocks and cryptocurrencies, and engage in side jobs,” she explained. With the increased availability of financial education both online and offline, millennials and Gen Z are better equipped to make informed decisions about their money and investments. “They have access to endless financial advice and information at their fingertips,” she added.
One area where younger clients fall short is estate planning. According to research from Trust & Will, only 58% of millennials have ever discussed estate planning with older family members, and 34% are unsure whether their parents have an estate plan.
“Estate planning is usually one of the last things people want to talk about,” said Den Murley, a partner at Belonging Wealth Management in Longview, Texas, in a conversation with Financial Planning’s Nathan Place. “People generally avoid thinking about their own mortality, regardless of their age. They also often assume that death is far off, so there’s plenty of time to plan.”
Samuel Deane, financial advisor and president of Deane Wealth Management, mentioned that many millennials, and other generations, misunderstand what estate planning is and who needs it. “There are a lot of misconceptions about estate planning,” Deane told Financial Planning. “We often hear things like, ‘I’m young, single, and don’t have kids, so I don’t need an estate plan,’ or ‘I don’t have much wealth, so I don’t need a trust.'”
A survey by health insurance company eHealth found that 94% of people born between 1965 and 1996 believe they are entitled to Medicare during retirement, and 84% are willing to pay higher taxes to keep it funded. However, Medicare could run out of funds by 2036 without Congressional action.
Whitney Stidom, vice president of Medicare operations at eHealth, pointed out that this presents a serious issue for those hoping to retire at 65. According to the 2022 Fidelity Retiree Health Care Cost Estimate, a couple should expect to spend $315,000 on health care during retirement, even with Medicare coverage. “Medicare is crucial because as we age, health care becomes more important,” Stidom said. “We visit doctors more often and face more health issues.”
A McKinsey survey showed that financial advisors are shifting from focusing solely on investments to acting as life and wealth coaches. This includes helping clients with health care, insurance, taxes, estates, and overall financial wellness.
“As a millennial, I believe this shift is largely driven by millennials and Gen Z, who see financial health as closely connected to physical and emotional well-being,” wrote Samuel Deane, financial advisor and president of Deane Wealth Management. “They seek financial planners who will not only manage their money but also guide them toward a balanced and fulfilling life.”
The impact of younger investors on the financial advisory industry is significant. As millennials face unique financial challenges while aiming for future stability, the role of financial advisors becomes even more important.
Research from Trust & Will has shown that many millennials are not prepared for estate planning. Although 81% of millennials think it’s important to have a will, only 36% have any kind of estate plan. “Many think it’s important, but just not right now,” said Samuel Deane in an interview with Financial Planning’s Nathan Place. “Or they don’t know what the next step is.”
Other findings highlight this lack of knowledge. Only 58% of millennials have discussed estate planning with older family members, and 34% don’t know if their parents have an estate plan.
A report from Cerulli Associates found that Americans under 42 increased their wealth faster than any other age group between 2019 and 2022. A majority of millennials and Gen Zers now own homes or have retirement accounts.
Many financial advisors enjoy working with younger clients because their approach to financial planning is different from older generations. “I like working with millennials and Gen Z because financial planning means something different to them than it does to baby boomers,” said Raman Singh of Singh Private Wealth Management in Phoenix. “They appreciate having a financial planner who holds them accountable.”