Advisors must 'get curious' about young clients' different relationship to money

How Gen Z and millennials are turning stereotypes on their head

Advisors must 'get curious' about young clients' different relationship to money

Advisors need to listen more carefully to their younger clients because a new study shows how they treat money is very different than older generations.

“Younger people will receive inheritances from older people. But, what we learned from our study is they’re also the most likely to be giving inheritances to others, which turns our stereotypical perspectives on their head and also asks us as advisors to consider some of the assumptions that we make as we meet with our clients,” Moira Klein-Swormink, the principal for wealth management advice and solutions for Edward Jones Canada, told Wealth Professional.

Edward Jones’ new study found that 54% of the Gen Z (up to age 25) and millennials (aged 26 to 41) surveyed said they require a financial inheritance or windfall to reach their financial goals. In fact, many had already received a wealth transfer since the pandemic began.

But, what was surprising was that the study also found that these cohorts were also the most likely to pass on money, too. In fact, 14% of the respondents of this age had initiated a wealth transfer since the start of the pandemic. That sharply contrasted to only 4% of those aged 55.

“We need to make sure that we’re checking our assumptions and our biases on a continuous basis to ask: ‘Hey! What might I not be aware of here? How might things be changing – as generations, work-life, or macroeconomic conditions change?” said Klein-Swormink.

“What we’re hearing from this study is the opportunity to consider how we bring everyone – whether they’re over 55 or under 35 – into the planning conversation. We need to start to talk about what’s important to them and what they’re considering and how they’re planning for the future. It’s really about getting curious about what you might not know about their circumstances and how they look at their future plans and goals and how their relationship with money might be different than what you, as an advisor, have experienced before.”

Read more:  'Our focus hasn't changed - we build deep personal relationships with clients' 

She said advisors should ask questions to open a deeper discovery and take the opportunity to learn from  younger clients about what their individual needs are and how they can support them.

The study showed that while Gen Z and millennials – as well as boomers – may receive a wealth transfer because of a family member or friend’s death, younger Canadians were actually initiating wealth transfer because of immediate life needs or events. 38% did because of a job loss or unforeseen home or health expense, while 33% did due to inflation and interest rates. Another 25% did for major purchases, such as buying a home or car or doing home renovations, and another 18% did because of significant life events, such as having a child, graduation, or birthday.

So, instead of saving money to pass on to the next generation – as boomers have – the younger clients were saving money for what they needed, spending that, and saving again.  They also tended to pass on their wealth to help family or friends who need edfinancial support.

Read more:  'Many Canadians are rethinking what retirement means to them'

“We really need reassess the traditional bank of mom and dad stereotypes and consider that it now is the bank of siblings or friends,” said Klein-Swormink. “That really makes us reconsider Gen Z and millennials’ needs in terms of financial planning and tax planning

“It really is about creating opportunities for people to design the life that best suits their goals and needs because they really are challenging the norms around how they work, how they generate wealth, and what they do with the money and when they do it. So, we need to get curious and ask more questions and consider how we navigate that in support of our clients.

“These findings reinforce that there is a shift away from what’s been considered traditional and  Canadians’ approach to their finances is changing. So are their financial goals and their sources of money,” she said. “So, it’s important to consider how you really listen to your clients and understand the values that are driving them, so that you can help them achieve their individual goals.”