Why younger clients are extending their financial timelines

Plans for retirement, housing, and vehicles are being stretched out

Why younger clients are extending their financial timelines

The continuing battle with inflation is impacting how younger clients are planning their finances, says one seasoned advisor who is already seeing that in his practice.

“What we’re seeing, particularly from our younger clients, is that they’re extending their timelines because everything costs more,” Rob Knight, the managing director and senior investment advisor for Steward Group with iA Private Wealth in Cambridge, Ontario, told Wealth Professional.

“There’s a finite pot of dollars. So, if everything costs more, that means it’s going to take them longer to get to where they want to be. We’re seeing that on a regular basis. What we’re not seeing is people throwing their hands up in the air and going ‘there’s no use’.”

The Steward Group is putting a premium on planning, beefing up that side of its business to help younger clients develop the roadmaps they need. If they have less financially to reach their goals, their advisors can help them determine the implications for reaching their financial goals.

Given the impact that even this week’s announcement about the continued rise in the consumer price index, with shelter, grocery, and gas costs increasing, is particularly having on younger clients, Knight is seeing them make different decisions than they may have made before.

For some, it means planning to work an extra year before they retire. For others, it means taking a really nice vacation every two years rather than annually. For others, it’s keeping their cars longer – or debating whether they should buy their leased vehicles and keep them rather than lease another.

“It’s more heavily weighted toward the retirement goals because those are easier to push out. They’re further in the future, so not quite as pressing,” said Knight.

“We’re not seeing people making real changes in their housing choices. It’s probably too soon to see whether it’s going to impact people who are already in an ownership position and whether they are going to continue to house up. Will they plan to move into a bigger, newer, or better neighbourhood house? I think those decisions are being pushed off. People are still planning to buy houses. They’re just taking a little longer to get there.

“People are keeping things longer. So, if there’s one word I’d use to categorize it, it’s that people are delaying a lot of things.”

Read more: How advisor is capturing the next generation of clients

While he suggested that advisors could encourage younger clients to be patient, he noted that older clients are already being patient with the markets because they’ve been warned that those vacillate. But, they’re also feeling some inflation impact on their plans, though much less than the young.

“The level of uncertainty has gone up a little bit. So people are questioning more: ‘do I have the ability to retire?’” said Knight.

“My experience has been that most people who are about to retire understand what they can spend, and they adjust. They may have had the plan or dream of taking a great big trip a year. Well, maybe they take one big trip a year, then take a smaller trip the next year. But, they’re still looking for the planning side from advisors to give them a strong, warm and fuzzy feeling that ‘yes, we’re making the right decisions.’”