May 14, 2018
Focus: Wealth Management / Retirement

Millenials and money: Financial planners reach out to new generation of investors

Photo / Tim Greenway
Photo / Tim Greenway
Scott Mazuzan, a financial planner and private client adviser at F.L.Putnam Investment Management Co., has helped the firm attract more millennial clients.
Photo / Tim Greenway
Tom Manning, president and CEO of F.L.Putnam Investment Management Co., hopes new services will entice younger clients.

A head start

Millennials believe in starting their wealth education earlier than other generations:

20 years old: when millennials started learning

25 years old: when Gen Xers started learning

32 years old: when baby boomers started learning

Source: RBC Wealth Management

Money tips for millennials

"Start saving and investing for retirement early, as the power of compounding is profound."

Amanda Rand, Spinnaker Trust


"Commit to a sensible investment strategy and stick to it unless your goals change. Avoid market timing!"

David Robinson, Robinson Smith Wealth Advisors


"Automate investing through payroll deductions with annual increases, or make it a percentage of your pay."

Tracey Daigle, Robinson Smith Wealth Advisors


"Pay off the highest interest rate student loans before doing anything else. The interest rate is not tax-deductible."

Geoff Alexander, R.M. Davis


"The key to long-term financial success is to live on less than you make."

Michael Kitces, XY Planning Network and Pinnacle Advisory Group

For millennial investors like Ben Lake, financial education starts at home. The 33-year-old from Minnesota started investing at age 15, when his grandmother began sharing stock tips and enlisted one of her advisers to help him set up a small investment fund. Lake, now with the Greater Portland Council of Governments, also credits his parents with teaching him about the importance of balancing spending with what he earns.

"All of that together made me much more aware of the value of saving," says Lake, who taps the advice of a large investing and brokerage firm and subscribes to Kiplinger's Personal Finance. As his generation moves into its prime earnings years, he's the kind of client that financial firms are courting.

90 million and counting

In the United States alone, there are now 90 million millennials, collectively known as Generation Y, versus 77 million baby boomers and 61 million Gen Xers.

While generational cutoffs aren't an exact science, the term millennial is generally applied to those born after 1980 and who reached adulthood in the early 21st century. Today's millennials are in their 20s and 30s, and many are children of boomers, now retiring in large numbers.

While most millennials are still in the phase of creating wealth, their aggregated global net worth is projected to more than double between 2015 and 2020 up to an estimated $24 trillion, according to a Deloitte report. It highlights three contributing factors: millennials entering their peak earning power, starting a business, and inheriting wealth from their parents. It also notes that more than two-thirds of wealth managers' clients today are over age 60, driving the future wave of inheritance. "These are a few reasons why wealth managers should start focusing on millennials," it concludes.

Doing so brings its challenges. Millennials are the first all-digital generation and tend to distrust big brands but value authenticity and social responsibility. They also start their wealth education at a younger age, and those who entered the workforce as the 2008 financial crisis struck tend to manage their finances more conservatively.

Shattering stereotypes

Photo / Tim Greenway
Photo / Tim Greenway
Musician Kelly Muse, pictured at 317 Main, where he teaches piano, is a fan of the Coffee House Investor blog.

While often stereotyped as entitled, self-absorbed over-spenders obsessed with social media and technology, millennials' money habits have proven to be as good as — or better than — older generations.

"You're talking about a highly educated cohort of people, with probably the greatest percentage of college attendance and graduation that we have seen, and people who are incredibly engaged in every way and interested in community and global impact," says Amanda Rand, who took the reins as president and CEO of Portland's Spinnaker Trust this year. "They've grown up with access to so much information at their fingertips, and so they're very savvy."

While Spinnaker doesn't have strategies for targeting millennials as a group, it has planned its own succession through the creation of a principal-partnership structure and Rand's appointment as leader. Ten years after starting, she's now advising second-generation clients who were just kids when she started.

"They're not interested in coming in and having you work your magic box," she says. "They want transparency and they're not shy about asking questions, which is great. That's how you form a trusting relationship."

Across town, at F.L.Putnam Investment Management Co., 34-year-old Scott Mazuzan has been instrumental in the firm's drive to bring in more millennial clients.

Besides hiring young advisers like him, the firm introduced two offerings in 2016: A fee-based structure for financial planning advice that opens the door for investors of all ages and income levels, and a combination of technology-driven robo-investing and personalized, client-centered guidance. Mazuzan advises his clients on everything from paying off student debt to saving for retirement.

The father of two young sons is in the same boat, and like Rand is impressed at how much his younger clients know.

"They're extremely curious and almost wary of the industry and they just want someone to tell hem what they're doing is sound or reasonable," he says. "In a lot of ways that makes my job easy."

F.L.Putnam's new services have already brought in younger clients the firm hopes to work with for decades. "We want to be in business for a long time," says Tom Manning, the firm's CEO and president.

F.L. Putnam is not alone in launching a fee-for-service formula.

On a larger scale, the XY Planning Network, co-founded by Michael Kitces, is "disrupting" the industry with its informal network of 640 advisers providing virtual and local services for Gen X and Gen Y clients on a fee-only basis.

"We don't see traditional firms going extinct," says Kitces, a Bates College alumnus and director of wealth management at Pinnacle Advisory Group in Columbia, Md. "But we see a huge opportunity for XYPN advisors to continue to expand the market for financial advice in the first place, by serving younger clients directly."

Bridging the generation gap

Among traditional firms in Maine seeking to bridge the generation gap are R.M. Davis, which runs a one-day financial-education summer school for young adults — clients' children, grandchildren, nieces and nephews. It switched from an in-house to a webinar format last year that covered a topics from credit scores to sustainable investing.

"It's an educational tool for us too," says R.M. Davis Vice President George Carr, who at 33 is the firm's youngest portfolio manager, a Bates College grad hired in 2015 after six years with Federal Street Advisors in Boston. He says he's found younger clients to be focused on setting money aside not just for retirement, but also for experiences, like one client in his 20s who favors spending more on vacations over maximizing retirement contributions.

At Robinson Smith Wealth Advisors in Portland, David Robinson and Tracey Daigle have also had to adapt, by emailing financial-plan reviews.

"In the business we're in, which is a service business, you have to accept that email is part of your work," says Robinson. "That started with the baby boomers but it certainly accelerated with the millennials." And while they do use LinkedIn and Twitter, they're not using social media to reach millennials.

Thompson-Hamel LLC in Presque Isle and Bangor is just the opposite, with regular posts on Facebook, LinkedIn and Instagram of firm outings, social activities and even employees' babies in Thompson-Hamel onesies.

"When we post things about real life, that's what gets people's reaction and gets people to like it or make a comment," says partner Bryan Thompson.

Regardless of what advisory firms do, none of it is likely to sway Kelly Muse, a musician with an MBA in finance who's skeptical of experts and is a fan of the Coffee House Investor blog.

"A few hours of reading and a little bit of research can really set you up for the rest of your life," he says.

Investing since college has paid off for Muse, who bought a house just before turning 40 in August. Born on the cusp of two generations, he identifies with millennials and has this advice for young investors: "Avoid going into debt, because debt is compound interest working against you."


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