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10 Mistakes Gen Y Makes with Advisors

10 Mistakes Generation Y Make with Advisors 10 Mistakes Generation Y Make with Advisors

Advisors have a lot to consider when working with Generation Y clients, but it’s a two-way street.

Here are 10 common mistakes Gen Y should avoid when working (or not working) with an advisor, and ways to get around them.

For the full story on working with Gen Y, click here.

1. Not Having an Advisor Help with Big Financial Decisions 1. Not Having an Advisor Help with Big Financial Decisions

“It’s a mistake to have no team of professionals to help make the best decisions possible when dealing with a large financial transaction like buying a house,” says Nick Pirnack, private client advisor for LotusGroup Advisors. “My generation tends to have this rugged individualism about them, and that’s a mistake when it comes to finances. You can be more creative, but trying to work off these visions on your own is not a good idea.”

 2. Not having a spending plan in place 2. Not having a spending plan in place

Without a spending plan in place, savings can quickly be depleted in the wake of taxes and inflation. Quick solution: “Get them on an electronic visible budgeting system,” says Ted Jenkins, co-founder of oXYGen Financial in Alpharetta, Georgia.

3. Not “paying themselves” first rule 3. Not “paying themselves” first rule

With all the hassle in paying off debt and worrying about daily expenses, Gen Y clients often forget to fund their most valuable asset: themselves.

There are multiple solutions to this, including “forced savings through a paycheck, or a monthly ACH,” says Ted Jenkins, co-founder of oXYGen Financial in Alpharetta, Georgia.

4. The Ones who Make Less Money Can be Less Receptive to Advice 4. The Ones who Make Less Money Can be Less Receptive to Advice

It has been commonly said that wealth begets wealth, and this adage seems to ring true with some Gen Y clients.

“The ones who make less money can be less receptive to advice,” says Ted Jenkins, co-founder of oXYGen Financial in Alpharetta, Georgia.

That’s because these individuals are often more anxious when it comes to each dollar, and this can sometimes create a blind-sighted vision of the larger picture.

5. Not Appreciating their Long Time Horizon in Investments 5. Not Appreciating their Long Time Horizon in Investments

Most Gen Y clients may not have as much investable net assets as their baby boomer counterparts, but they have an asset that they rarely optimize: their youth.
“Their risk tolerance has been colored by last several years in the market,” says Michael Joyce, founder of Virginia-based Joyce Payne Partners. “Often, they don’t appreciate how time can be their friend for longer term objectives.”

6. Itching to Get Ahead Professionally 6. Itching to Get Ahead Professionally

“Sometimes it takes time to do the things you want to do in school, says Michael Joyce, founder of Joyce Payne Partners. “Sometimes, Gen Y can get impatient, and not realize that there are more stepping stones to get where they want to be.”

School is important, but it is not the means to all ends.

“With more people taking advanced degrees, there’s an itch to get where they want to be from a professional standpoint,” says Joyce. “Sometimes, getting that experience is needed.”

7. The Budget Cliche 7. The Budget Cliche

“While it sounds “junior league,” Gen Y (and Xers to a degree) still fail to properly budget and do other personal finance best practices such as automating things,” says Brandon Moss, managing director of United Capital. “Instilling these ideas now will pay great dividends (literally) later in life.”

Unfortunately much of the advice in this area is "skip the Starbucks" or "don't eat out as much", says Moss, and this generation isn't going to do that.

“What is extraordinarily valuable to these clients is teaching them how to and even helping them negotiate a higher salary,” says Moss. “They also respond well to the power of automation in their financial lives. If you automate all your savings, 401k, etc. as well as your bills, obligations and charity once a year or so, your budget is done.”

8. This Generation Struggles with Insurance 8. This Generation Struggles with Insurance

“Gen Y fails to properly insure themselves for disability and life: they are great at their houses and cars, but awful on their own lives,” says Brandon Moss, managing director of United Capital. “Consider the young doctor who goes from earning 100K to 350K when his practice takes off. He might think he has the world at his fingertips and then his spending habits change. But if he were to fall ill and couldn’t work for an extended time period, think of what might happen to his young family as their spending routine increased with his higher earnings. Or even scarier, what if he passed away and left a young wife and children at home with little income?”

Moss suggests the time to think about insurance and the future is now.

“I know from speaking with colleagues and friends in situations very much like the one described that they almost always feel “this can wait.”, he says. “But you can’t wait. In reality, this is one of the biggest financial blind spots in many Gen Y’s financial lives.”

9. Working with "Old School" Advisers 9. Working with "Old School" Advisers

“Not taking the time to find an advisor that truly understands them and sticking with an “old school” advisor who just tries to beat the market and does not take time to listen to their life goals and aspirations is a big mistake,” says Brandon Moss, managing director of United Capital. “If they don’t feel connected to the advisor, they will tend to drift from firm to firm, and that is not a solid long-term solution. They need people and firms that are going to be around for as long as they are and truly understand them and work the way they do.”

10. Planning too far out 10. Planning too far out

“Even though retirement is still one of the big topics, to think we can work with assumptions that are 30, sometimes 40, years out and be accurate is a fools game,” says Brandon Moss, managing director of United Capital. “They need a process that keeps them on track, but also one that addresses the needs they have today. Both clients and advisers often fail to recognize this.”

And in case you missed it, here are some challenges advisors face when working with Gen Y.

Advisors have a lot to consider when working with Generation Y clients, but it’s a two-way street.

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