When creating financial plans, you leverage predictable facts about clients, such as their age and average income, to help with calculations. But that strategy may not work as well in the years to come, as labour and demographic trends shift.

Various studies show millennials (generally considered those born between 1981 and 1996), in particular, are aiming for longer careers with more variety and gaps. A 2016 report from U.S.-based staffing firm ManpowerGroup found 84% of the 19,000 millennials surveyed worldwide expected to take breaks of four consecutive weeks or more during their careers.

And millennials aren’t the only cohort driving change, says James McCreath, portfolio manager at BMO Nesbitt Burns in Calgary. A 2018 BMO report on the gig economy found that all client segments in Canada, from boomers to millennials, are increasingly choosing jobs with short or uncertain durations.

Advisors don’t need to reinvent their planning approach, McCreath says, but they do need to keep an open mind.

“It doesn’t lead to easy compartmentalization or easy planning,” he says of clients who expect an unconventional career path.

One gen-Xer’s story

Sofia (not her real name), an Ontario-based arts consultant, has taken several career breaks. Though part of gen X, she says she likes the way millennials think.

“I would recommend [taking breaks] to anybody, but it is challenging,” she says. “In our society—at least in my age group—there’s a vision that you have to work.”

Aside from taking time off to pursue a master’s degree, her first major career break and shift was in her early 30s. She was single and renting, had no other obligations and wasn’t satisfied with her architecture career.

“I was ready for a change, job-wise,” she says.

That’s when she saw an opportunity to volunteer with Habitat for Humanity in Argentina. Before applying, she consulted an advisor friend who’d helped her handle the inheritance she’d received after her father died. They reviewed her assets and cash flow, and put some money into shorter-term investments. Once satisfied she could be overseas for eight months on the budget they set, she applied to volunteer.

The work break didn’t go as expected. Argentina’s 2001 financial crash meant the placement didn’t happen, but Sofia was already in Peru when she found out. She used the time to travel instead, saving money by staying with family and in hostels.

Upon her return, Sofia initially stayed with her mom before she found her current arts consulting job, for which her travelling experience and resulting cultural knowledge were assets. She’s since taken a six-month break to work with an NGO in Bolivia, where she developed ties with artistic communities that have further helped her career.

Planning ahead was important both times—especially for the more recent break, when she had a car and a mortgage on her condo. She and her advisor reviewed all of her expenses and how she’d be affected month-to-month when she switched from a regular paycheque to a $10-per-day stipend. To bring in more money, she rented out her condo for a year, including a five-month period upon her return when she again stayed with her mom while searching for work. She also kept some liquid emergency investments in case any hurdles arose like the first time.

Sofia says her experiences on both breaks were “amazing and freeing,” and she learned a lot about herself. “I’m a lifelong learner,” she says. “I’ll always be taking a course here or there, and then there’s volunteering.”

How advisors can help

An advisor’s main goal when working with a client like Sofia should be to listen and relate, and to help her consider all possible variables and what she can afford. This applies to clients looking to travel, focus on a passion project or hobby, or simply work less for a set period of time, McCreath says.

While it’s crucial to help prevent “ruinous financial decisions” and emphasize the weight of debt, he says, you also need to base your advice and approach on a client’s planning personality. Figuring out whether someone is a big planner or a spur-of-the-moment type helps early on.

“If you start by grinding the latter group too deeply into the finances, it feels a bit like you’re crushing them,” he says. “That’s not constructive.”

McCreath, who took a break in his 20s to pursue his master’s, suggests a client who’s either pivoting or taking a short-term work sabbatical needs to think about five things: their immediate plans; their budget, with a focus on debt obligations; their emergency funds; any potential financial and health risks; and their short- and long-term life and investing goals.

“You can start with a budget and then, if people take years off, the budget in many respects is the financial plan,” he says. That plan can expand, but key starting metrics are how much money is needed to fund the break and how many debt prepayments will be needed to cover expenses, for example.

When it comes to investments, McCreath says, “You take no risk, and use cash or GICs or high-interest savings accounts” for money that’s needed within the next year. Additional funds can be invested in conventional tools such as stocks, bonds, ETFs and mutual funds.

Clients should also consult accountants for any cross-border tax implications of their break.

Jonathan Murphy, senior financial advisor at Scotiabank, also starts with cash-flow planning, which he says can identify whether a client taking a break must make lifestyle changes now to fund their time off, and whether they’ll need to liquidate or make investments to supplement income. Both he and McCreath say meetings about career breaks are likely to span multiple sessions, and both check in regularly while clients are off.

Retirement planning isn’t off limits, even while clients aren’t working. While the long-term picture will likely be unclear when clients aren’t sure what their careers will look like, Murphy says the young people he advises (many in their 20s and 30s) are still concerned about issues like pension plan changes and retirement trends.

Sofia can relate. “Thinking about putting money away for the future has been important to me,” she says. “I saw my mother ill at an older age and needing assistance, and with no family left in Canada. I need to make sure I take care of myself.”

What millennials want

Being continually challenged is important to millennials. “When asked what the ‘right’ amount of time is to stay in a single role before being promoted or moving to another, about two-thirds said less than two years, and a quarter said less than 12 months—confirming their appetite for new challenges and portfolio-style jobs,” a 2016 report from ManpowerGroup says.

Seventy-three percent of the millennials ManpowerGroup surveyed in 2016 classified themselves as full-time workers, with 71% saying they were likely to continue that way. However, many could also picture themselves working part-time (30%), as a freelancer (28%) or as self-employed (34%) in the future.

Source: ManpowerGroup