Millennials are digital natives, having been born in the age of convenience with an app for everything. Being 2.5 times more likely to be early adopters of technology than any other generation, they are entrepreneurial to the core and value products that can enhance their lives while allowing them to spend more time on experiences.
Although often referred to as narcissistic as a result of their propensity for selfies and social media over-share, Millennials are a generation of activists who are not afraid to challenge the world order, and delight in harnessing the power social media to strengthen their cause. As a generation, Millennials are the largest and the most studied generation in history, albeit simultaneously burdened by enormous amounts of student loan debt – a source of much anxiety to this group of people.
Delaying milestones in favour of travel and adventure has made Millennials the fuel that fires the rapidly growing experience economy. Being digital nomads, they are able to combine work and play using apps such as Uber and Airbnb to ensure seamless integration of their lifestyle. Their jobs centre around STEM – Science, Technology, Engineering and Maths – with their careers being littered with job changes, business ventures, career about-turns and entrepreneurial undertakings. Holding down formal employment while dabbling with start-up initiatives is considered the norm. Coupled with their entrepreneurial spirit, their global mindset drives them to be both socially and environmentally responsible, and this extends to the way they choose to invest.
These unique characteristic have ushered in a new kind of financial advice which meets the needs of this widely diverse and distinctly identifiable generation. By their very nature, financial plans for this generation need to be fully customised and completely adaptable. The indebtedness of Millennials in terms of student loans is counter-balanced by the fact that they have the longest investment timeline of any generation that has ever lived. Prioritising the settling of student debt is made difficult by the relatively low starter-incomes paid to professionals such as accountants, lawyers and doctors in this country. Many Millennials begin their careers conflicted between settling their student loans and funding for their retirement, although their concept of retirement remains wildly different from that of the Baby Boomer generation.
A formal, planned retirement is an anathema to Millennials who identify more favourably with the end-goal of financial freedom at whatever age they set for themselves. The greatest challenge to their wealth accumulation is the temptation to withdraw their retirement fund benefits when moving between jobs, careers and start-up initiatives. Uniquely tailored financial, tax and legal advice is essential for navigating the intricacies of setting up business ventures, understanding group benefits, structuring benefits when moving jobs, and weighing up the benefits of preserving accumulated funds versus injecting capital into a viable start-up. The nature and extent of such advice surpasses that which any robo-advisor is able to provide. The redefinition of retirement planning into something more fathomable to this generation is one of the challenges that we, as financial planners, face. While planning for retirement remains essential, financial planners need to consider that Millennials have a different vision of retirement which involves passive income generated by business ventures, extensive travel and financial freedom that allows them to exercise one of their greatest fundamentals – choice.
While old-school financial plans are generally built around structured income, group benefits and compulsory retirement funding, financial planning for this generation involves making allowance for variable income, multiple income sources and creative structuring of benefits. There is a generational delay in key milestones such as marriage, having children and purchasing homes, and these factors need to be taken into consideration when developing the financial plan. In fact, while previous generations have chased the dream of home ownership, Millennials are more content to rent smaller premises in favour of spending money on travel and adventure – a break from the Baby Boomer mould of work, purchase home, save and then travel.
Millennials are driven by causes that are close to their hearts, and desire to make a genuine impact on the world – and this extends to where they choose to place their money. According to research, 37% of Millennials are willing to purchase a product that supports a cause they believe in, even if it costs slightly more. From an investment perspective, Millennials want to agree with the ethics of companies they invest in and require full exposure when investing in shares. With online apps available for budgeting, saving, spending and debt management at their fingertips, the relationship with their financial planner needs to be one of professional substance.
This generation seemingly prefers to spend money on experiences as opposed to possessions, having realised from their parents that money cannot make one happy. In a survey conducted by Everbrite, they found that 78% of Millennials would prefer to spend money on experiences rather than material objects – hence the rise in events such as weekend music festivals, overseas volunteer programmes, ultra sporting events and international conventions for anything from stamp collecting to Star Wars. They recognise that they can have anything, but they cannot have everything, and are happy to manage their financial affairs using a values-based budget – making financial provision for that which is important to them and trimming back on expenses that do not make them feel fulfilled.
There is no doubt that Millennials are setting the stage for an exciting era of financial planning that meets their demand for unbridled choice, extensive pliability and the ability to cater for an unpredictably exciting future.
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