Financial planning can be an intimidating prospect, particularly for first-timers with little experience managing money. The process not only covers a wide range of finance concerns, but markets and policies are always in flux, leading to regular changes in the way money matters are administered.
With so much in play, it’s only natural for UK planners to consult professionals, seeking financial guidance. However, though financial help is available for many Britons; members of the millennial generation may not have the same access to professional resources that their parents have enjoyed for years.
The solution for knowledge-hungry millennials, it seems, is to explore alternative sources of financial advice. Many young money managers are sidestepping traditional financial planning practices, in favour of a kind of DIY approach, using apps and digital platforms to answer their questions about money.
Young Earners Adopt a Different Approach
A recent Financial Times article took a look at some of the ways millennials are answering questions about money. As younger workers enter full stride, they encounter the same monetary milestones others experience. Their careers take-off, many take steps toward property ownership, and financial concerns like ISAs and pensions become more important. These hallmarks naturally present questions, prompting many inexperienced millennials to seek advice from traditional sources. According to the FT piece, they aren’t always welcomed with open arms.
In their search for meaningful financial guidance, it is thought many young people encounter resistance from the financial planning industry. According to FT contributor, Iona Bain, independent financial advisors (IFA) are not eager to embrace millennial earners, due to their limited net worth and earning potential. The author argues her own generation may actually have a more pressing need for advice than some others do, pointing to student debt, a tougher path to the property ladder, and increased self-employment as challenges unique to the millennial generation.
Unless you’re earning a high salary, juggling an inheritance, or on the cusp of a career with notable income potential, Bain estimates you’ll be greeted coldly by many advisors. And if that’s not enough, IFAs willing to accept you as a client may charge fees you can’t afford. Although flexible loans are made available to working millennials, irrespective of their credit strength, borrowing money to pay for financial advice may be counterintuitive to cash-conscious young people, striving for a leg-up.
Faced with a lukewarm reception from professional financial advisors, pragmatic millennials are not giving up on their financial futures. Instead, many money-curious young people are turning to apps and digital services to get the answers they need.
Finding Answers on Their Own
The commonly held belief that millennials spend too much and save too little may be driving IFAs to turn away their business. It is thought earners making less than £50,000 annually may not bring the lustre advisors desire, so a very small percentage of millennials get good guidance. In response, they’re embracing new planning solutions aimed at the tech-savvy generation.
From 2000 onward digital fintech services have grown to become an increasingly prominent part of the financial planning industry. Members of the millennial generation now have access to a rising number of online digital wealth management platforms, such as Moneyfarm and Nutmeg, which provide recommendations based upon parameters defined by each would-be investor. Absent traditional wealth management strategies, millennials appear to be making the most of this new wave of money tools.
Though the trend toward ‘robo advice’ isn’t without pitfalls, the services may be more conducive to millennial lifestyles than some traditional pathways are. The robo services aren’t capable of furnishing whole-of-market advice, nor are they legally allowed to make claims reserved for IFAs, but the platforms may be effective for steering young investors toward suitable funds.
According to some professionals within the industry, millennials’ financial circumstances are often more straightforward than older investors, so they don’t necessarily need to pay for all the bells and whistles that come with expensive wealth management advice offered by independent financial advisors.
Fortunately, young people without substantial savings or high earning potential have other places to turn for financial guidance, beyond traditional IFA services, because the millennial generation appears underserved by the UK wealth management industry.