When it comes to millennials, the main focus for advisors appears to be their apparent lack of financial literacy and struggles with debt. In March 2017, research from an Ontario-based insolvency firm suggested the number of insolvent millennials is rising and that many are living paycheque to paycheque, while a recent TD survey found the cohort doesn’t see value in products like life insurance and long-term planning.
While the findings aren’t inaccurate, there’s much more to the story.
According to a new BMO report, millennials are indeed concerned about their debt — given seven options, nearly a quarter (23%) polled identified paying down debt as a top concern, compared to finding better paying work (17%) and saving for retirement (11%). However, there’s a divide between older and younger millennials, with the older group almost twice as worried (30%) as the younger respondents (17%) about life after work, suggesting some appetite to plan.
Further, while millennials face challenges, the report points out that they’re “better equipped to make positive changes by virtue of their skills and education, which exceed those of any previous generation at the starting point of their careers.” For example, it adds, they may be more philanthropic and willing to help others.
The key may be to discuss saving and investing in a way that helps address their fears. As the report shows, millennials are worried about things like job security (63%), the stability of their personal relationships (62%) and their living situations (48%). The biggest divergence between male and female respondents was in their concern over their financial knowledge (39% versus 29%, respectively).
While 41% say retirement is too far off to plan, that’s underlined by the worry that they may not be able to afford it at all (24%). If you consider that millennials prefer savings accounts (39%) and TFSAs (20%) over RRSPs (13%), you can help them understand how to better use those vehicles.
As the report explains, “The TFSA is particularly advantageous to millennials because of their youth, which means there should be a long time to compound the investment returns in a tax-free environment.”
The BMO report is mainly based on an April 2017 survey of more than 1,000 Canadians aged 18–34, but it also cites other research. Read the full report.
- The BMO report points to a 2014 PwC study that found: “Only 24% of millennials in the PwC study demonstrated basic financial literacy and a scant 8% showed a high level of financial literacy.” But, when asked about their top concerns and overall priorities, BMO found 34% are worried about their level of financial knowledge and 14% want to upgrade their educations.
- A small percentage of the millennials polled (6%) expect employer and/or government pension plans to provide enough income for retirement, while 1% plan to depend on inheritances.
- The top three characteristics that millennials look for in advisors, the report says, “included the ability to provide personalized advice (58%), knowledge and experience (55%), and a high level of service and ongoing communication (47%).” Responsible investing insight came in at 27% and use of tech was at 19%. Read: Advisors must offer collaboration, convenience: IIAC and Sustainable ways to offer responsible investing
- According to separate data released Tuesday by Allianz Global Assistance, more than 40% of Canadian travellers who report not acquiring travel insurance when they leave the country are younger Canadians, aged 18 to 34. (Survey data was collected by The Conference Board of Canada from 2,159 Canadians, and was weighted to the population by age, gender, and province of residence.)