Educating millennial investors on "needs and wants"

Edward Jones principal surprised by what different demographic groups deem "financially comfortable"

Educating millennial investors on "needs and wants"

Advisors need to educate millennials about the difference between “needs and wants” if the results of a new Edward Jones survey is any indication.

Patrick French, principal, client depth, said he was surprised by the numbers when Canadians were asked how much annual income they needed to be financially comfortable.

The study revealed that millennials (aged 18-34) needed $166,622 but that rose to $299,854 when asked what they needed to afford their ideal lifestyle.

Canadians aged 35-54, meanwhile, believed they needed $60,000 more than millennials at $227,290 to feel financially comfortable, while those in the 55-64 category said they needed $398,347 and an extra $70,000 to live their ideal life.

The head-scratching aspect of these results is that the country’s median, after-tax income is only $56,000.

French said: “It’s so surprising to me and part of this is comparing it against the average income of Canadians – it’s a very high income for people to feel comfortable.

“The only thing I can think of is there are a lot of very uncomfortable Canadians out there or that this is really a distinction between the elements of needs and wants. Do people understand? Have they spent the time to work with a financial advisor focusing on your goals? What do you actually believe and want to accomplish.”

Millennials, said French, may be influenced by a number of factors such as media, social media, cost of living and housing, for example. These aspects don’t talk to a specific financial plan or any understanding of what the person wants to accomplish in their life.

Realism is a big part of that … and that’s where an advisor can come in.

French said: “There may be an opportunity for advisors to focus as much on why are we doing this and what are we trying to accomplish as much as the performance of a portfolio or the holdings that are in a portfolio.”

He added: “I look at these [study] numbers and it is more practically possible, I would say, to adjust expectations than it is to adjust income.

“If this gap between the average-incomer and what people believe they need is causing Canadians discomfort, step one is really understanding whether I really need that $300,000 number. Is it an aspiration objective and practical? Here is where I would need to work with a financial advisor and use the tools and resources available to me.”

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