Millennials Inspire a New Approach to Financial Planning

Millennials are bringing new challenges to the world of financial planning. Years of financial crises including the dot-com bubble, the housing collapse of 2008 and the WorldCom and Enron scandals have left a bad taste in the mouths of millennials when it comes to the financial world. The result has been a more conservative investment force which is risk-averse.

Chief investment officer and senior vice president of Charles Schwab Investment Management, Omar Aguilar agrees that millennials have presented a new breed of investors who are unlike traditional investors of the past. Simon Mendelson of Americas at Deutsche Asset & Wealth Management describes the more conservative investment approach of the millennials as being due to “economic post-traumatic stress disorder”.

The new outlook on investments has caused financial planners to have to stop and reassess how they advise their clients. Complex domestic regulatory rules put in place after the financial crises of the 2000s have presented its own challenges when it comes to the art of investing. Internationally, the rules from country to country vary considerably, causing additional complications.

Principal Funds managing director of product development, Kara Hoogensen, feels that the new regulations could potentially harm the investors instead of protecting them. She feels that the most important advice a financial planner can give millennial investors is simply to save. She argues that asset allocation and investment return do not play as crucial of a role in the actual outcome as the act of saving alone.

Hoogensen also supports automated retirement plan contributions and even goes as far as advising them to be mandatory in the workplace. She also favors employer-matching programs which she feels leads to higher percentages of contributions.

Regardless of the reasons behind investment concerns of the millennials, the overall advice to investors seems to be to simply save.