According to the Brookings Institute, more than half of Americans were Millennials or younger as of July 2020. While the term “Millennial” has been synonymous with “young adult” throughout much of the past decade, it actually describes those born between 1981 and 1996. Many Millennials, now aged 26 to 41, are advancing in their careers, saving for retirement, and planning their children’s financial futures. The oldest members of Gen Z, ages 18 to 25, are beginning to earn full-time wages and are projected to make up nearly one-third, or 30%, of the workforce by 2030.

Although many financial planners have years of experience working with the parents and grandparents of these younger generations, some are still getting to know Millennial and Gen Z clients who are just starting their financial journeys. The circumstances, priorities, and events that define Millennials and Gen Z often differ from those of Boomers and Gen X. Financial planners must understand these differences to provide these younger clients with relevant advice.

Why Financial Planners Should Engage with Millennial and Gen Z Clients Now

Financial planners who understand the importance of connecting with Millennial and Gen Z clients today position themselves for future success. Some wealth management firms are already changing to attract younger clients, who increasingly prioritize diversity and technology when choosing financial planners. Merrill Lynch, for example, has diversified its advisor force and improved its technology, with people under 45 making up 20% of new clients this year, up from 10% five years earlier.

Millennials and Gen Z are open to working with financial professionals. Three-fifths of Americans, including 71% of Gen Z and 72% of Millennials, want trustworthy financial advice but aren’t sure where to get it. Haley Tolitsky, CFP®, a financial planner at Cooke Capital, observes that younger generations are often excited to discuss their finances. A member of Gen Z herself, Tolitsky says her younger clients “want to be educated and they want to do better.” In a rapidly changing job market and the aftermath of a global pandemic, the time is right for financial planners to engage with these motivated clients.

Challenges That Shaped the Financial Lives of Millennials

Although Millennials now have a collective $1.4 trillion in purchasing power, their defining features as a generation include the financial setbacks they experienced from 2007 to 2009 during the Great Recession. Those entering the workforce at that time faced high unemployment rates and many had to settle for lower wages, resulting in the average working-age Millennial losing about 13% of their earnings between 2005 and 2017.

Many Millennials postponed financial milestones like homeownership. Around 14.8 million Millennials have student loan debt, more than any other generation, with an average balance of $38,877 per borrower. They also possess little to no emergency savings and have less overall wealth than previous generations.

Today, older Millennials are beginning to recover their lost wealth and career opportunities and are in a prime position to plan their financial futures. December 2021 was the first month Millennials surpassed pre-pandemic employment levels, and the unemployment rate for those ages 35 to 44 reached 3.3%, below the national rate of 3.9%.

As they gain financial stability, some Millennials are prioritizing paying down student loan debt, buying houses, raising children, and saving for their children’s educations. While some of these goals are shared with older generations, younger clients approach them differently.

One significant difference between Millennials and previous generations is the amount of financial independence and agency that younger women hold. Merrill Lynch found that 75% of women under age 45 manage their own finances, and younger married women are twice as likely to be the primary decision-maker in their households.

Millennial women also earn more relative to their spouses than previous generations. They are twice as likely as their mothers to make more money than their partners. Lauryn Williams, CFP®, founder of Worth Winning, who specializes in financial planning for Millennials and young adults, adds that “many female clients are the primary breadwinners.”

Importantly, many women are also more willing to connect with a financial planner. Increasing the number of female financial planners is crucial to serve the growing number of women managing their own finances.

The Financial Goals of Millennials

Due to early financial challenges, many Millennials put off life milestones like homeownership and having children. However, these remain priorities, according to Williams. In fact, 90% of her Millennial and Gen Z clients are homeowners or actively engaged in the homebuying process.

Tolitsky adds that as the cost of living has skyrocketed in many U.S. states, young clients value help navigating the homebuying process. Both Williams and Tolitsky noted that their younger clients value financial independence and view homeownership as an extension of their individuality.

As for having children, many Millennials are getting married and having children later in life than previous generations, raising the cost of achieving this for some. Williams remarks that some of the most common expenses she helps her clients budget for include IVF (In-Vitro Fertilization), fertility treatments, egg freezing, and even surrogacy.

Some Gen Z clients anticipate a similar fate and are investing in freezing their eggs early. Because these expenses are not always fully covered by insurance, Williams works with couples and individuals to help them achieve their dreams of parenthood. She also notes the rising popularity among LGBTQ+ clients of preparing financially for children.

One of the goals that many Millennials have deprioritized, according to Williams, is retirement. Only 58% of Millennials are saving for retirement, compared to 70% of their younger Gen Z counterparts. “The word retirement doesn’t resonate with my clients. They don’t plan to stop working,” Williams explains, “People see their parents doing well as professionals in older age and don’t want to plan for retirement at 65 or 70 because they assume they’ll be in great shape.”

61% of older Millennials believe they’ll be working at least part-time during retirement, according to CNBC. But this isn’t the only reason Millennials are focusing their efforts elsewhere. 47% of Millennials say they experience stress about the welfare of their families and their longer-term financial futures. Williams says that as a result, “They are prioritizing kids’ education over their own retirement. It’s important to us to give our kids the opportunities that we didn’t have.”

Lastly, and potentially most importantly, older Millennials are poised to inherit $68 trillion. By forming relationships with these clients early, financial planners can build the trust needed to help allocate this income responsibly and lay the foundation for a fruitful financial future. This is, of course, not as straightforward as it sounds. One obstacle Williams encounters is obtaining her clients’ parents’ estate planning information. Many Boomer and Gen X parents are reluctant to share this information, making wealth transfer planning difficult. Additionally, much of this wealth will not transfer directly to Millennials or Gen Z but through Gen X.

Notably, many Millennials express an interest in improving their financial situations. 50% of Millennials polled by Nationwide Retirement Institute® said they see a need to use a financial professional, and more than 75% said they want to work with a professional to help mitigate risk and plan for retirement.

Gen Z: Financial Lives Shaped by Diversity and Technology

Gen Z, the generation succeeding Millennials, holds an estimated $143 billion in spending power and is projected to surpass Millennials’ income by 2031. This is significant, considering the youngest members of Gen Z were born as late as 2012.

Gen Z also differs demographically from Millennials. According to the U.S. Census Bureau, Gen Z is the most diverse generation in U.S. history, with racial or ethnic minorities accounting for nearly half of the demographic. A quarter of Gen Z is Hispanic, 14% black, 6% Asian, and 5% a different race or two or more races.

Wealth management firms would benefit from reflecting the demographics of the rapidly changing population, as Gen Z demands more diversity and representation across all businesses they patronize.

Another core characteristic of Gen Z is its digital nativism. Most grew up with access to the internet and social media, so they are used to receiving information instantaneously, including financial information.

“This generation has had more access to financial literacy and financial education than any generation before,” says Tolitsky, who notes that many of her Gen Z clients display strong foundational knowledge when arriving at their first planning sessions. “You can watch a 32-second video and learn what a Roth IRA is. Past generations didn’t have that.”

Technology and easy access to information aren’t always a good thing. 51% of Gen Z respondents admitted to having taken online financial advice from someone they didn’t know. Akeiva Ellis, CFP®, warns that it’s crucial to separate the experts from the amateurs or scammers on Instagram, YouTube, and TikTok.

Tolitsky adds that many of her clients feel a sense of urgency after watching influencers online discuss their streams of income and investments, which sometimes prompts interest in financial fads. She emphasizes to them that much of what we see online is unrepresentative and that each person must make decisions based on their own circumstances, rather than what they feel they “should” be doing.

The Financial Goals of Gen Z

Gen Z is in the early stages of accumulating wealth, but many 18 to 25-year-olds in this cohort have already made strides toward financial goals. In addition to working toward goals like financing their education and paying down student loan debt, many older members of Gen Z have been proactive about investing, retirement saving, and homeownership, with 70% already saving for retirement and 66% investing in stocks, real estate, or cryptocurrency.

Gen Z is projected to be the most educated generation, with 59% pursuing higher education. As such, education and student loan debt remain major priorities. However, after observing Millennials