Planning For Longevity

Advising The Next Great Wealth Transfer

Building wealth for a new generation of clients

by Craig Hawley

Mr. Hawley is Head of Nationwide Advisory Solutions. Visit

As a financial advisor, helping your clients to build more wealth and reach their financial goals is at the center of everything you do. Developing a holistic plan across all three stages of their financial lifecycle includes effective strategies for accumulation and income generation, so clients can prepare for and live in retirement, as well as legacy planning to ensure that they can leave a lasting impact.

While every generation looks for help building wealth, studies show that Millennials have unique needs, and present a unique opportunity for your firm. Now making up over a third of the U.S. population, Millennials are a prime target for your services as they move into their prime earning years and inherit their share of the $30 trillion Great Wealth Transfer.

The most diverse and most educated generation so far, Millennials are not without challenges. A recent Brookings Institution’s report compared the median net worth of Millennial households (ages 25 to 35) in 2016 to those that were the same age in 1995, and found that today’s generation has been left behind. The median net worth of Millennial households was $18,200 in 2016, compared to $31,273 in 1995 – a 41 percent shortfall.

Confronting Millennials’ current wealth gap, and helping them generate more wealth to achieve their financial goals, requires understanding their unique characteristics. As revealed in our fourth annual Advisor Authority study of more than 1,700 RIAs, fee-based advisors and individual investors, you can build greater trust and achieve greater engagement by addressing the challenges Millennials face—from navigating their outsize debt, aversion to risk and concerns about taxes—while adapting your practice with innovative technology to align with their preferences and priorities.

Understanding Millennials: Life – and Debt

Millennials have higher levels of education, but with their diplomas come higher levels of student debt. The total amount of student loan debt has doubled over the past decade to top $1.5 trillion according to the Federal Reserve, and Millennials are saddled with more debt overall than previous generations. This comes with substantial consequences, as many Millennials delay major life events, from purchasing a home and saving for retirement, to marrying and starting a family, in order to focus on paying down student loan debt.

Coming of age during the 2008 Financial Crisis and Great Recession, Millennials entered the workforce facing lower-paying job opportunities. In turn, this has hindered their wage growth compared to previous generations, creating roadblocks for achieving financial independence and building more wealth. Likewise, the Market Crash of 2008 made Millennials more risk averse and reluctant to invest in the stock market. Studies show that Millennials tend to favor cash for long-term investing, ahead of stocks, bonds and other asset classes. They are also likely to hold twice as much cash as any other generation in their investment portfolios.

Given their aversion to risk, it’s no surprise that a majority of Millennials (53%) say they have a strategy in place to protect their portfolio against market risk, according to Advisor Authority. And given all of their complex financial challenges, it’s no surprise that Millennials say the number-one reason they have an advisor is to feel more confident in their financial future.

But what is surprising is their top factors for choosing an advisor. All generations, including Millennials, say experience matters most when choosing their advisor. But while other generations say that holistic planning and a fiduciary standard are among their top factors for choosing an advisor, our study revealed that socially responsible investing and reducing fees for younger clients are among Millennials’ top three.

Tech-Enhanced Planning for Digital Natives

According to Pew Research, Millennials consider technology use as the defining characteristic of their generation. Digital natives born and raised in the age of the Internet, Millennials are members of the “selfie” generation, with a need for constant connectivity and an ever-present fear of missing out. They rely on social media and innovative technology for a holistic picture of every aspect of their life – from communication, news and entertainment, to spending, saving and investing – in one convenient platform.

To serve your tech-savvy Millennial clients the way they have come to expect—in a world where Netflix and Amazon have raised the bar for convenience, choice and greater value—the solution is integrated technology platforms that fit the way you work, with the tools, analytics and reporting capabilities that you need

To serve your tech-savvy Millennial clients the way they have come to expect—in a world where Netflix and Amazon have raised the bar for convenience, choice and greater value—the solution is integrated technology platforms that fit the way you work, with the tools, analytics and reporting capabilities that you need.

We know successful advisors use more technology and invest more in technology to gain a competitive edge, through our Advisor Authority study, and our ten-year track record serving RIAs and fee-based advisors. A prime example of meeting their needs is our platform’s integration capabilities with other leading platforms used by over 95% of all RIAs and fee-based advisors—including custodians, portfolio management systems, and trading, rebalancing and account aggregation. We’ve taken the extra step of “building the pipes” for direct data feeds into comprehensive platforms such as Orion, Pershing Advisor Solutions and Envestnet; services such as By-All-Accounts, eMoney and Ndex; and data transmission conduits such as BAA, DST, DTCC.

Technology matters to Millennials. But they still seek a human connection. They’re more likely to say technology is a factor in choosing their advisor and more optimistic about its benefits, according to Advisor Authority, but their preferred form of communication is face-to-face, surpassing phone calls and all other digital channels like email, social media, video chat and text messages.

Help Millennials Manage Taxes

Taxes are the number-one financial concern of Millennials, according to Advisor Authority. Taxes have a direct impact on how much they can put into their pocket and keep in their portfolio. In fact, Millennials say taxes are the number-one macro issue that will most adversely impact their portfolio over the next 12 months. And managing their taxes is their number-four reason for having an advisor. To address these concerns, make tax-advantaged investing a priority all year long.

There are several different levers you can use to help Millennial clients take greater control of taxes. Start by maxing out tax-deferred qualified plans, such as 401(k)s and IRAs, and tax-free qualified plans such as Roth 401(k)s and Roth IRAs. For additional tax deferral, consider low-cost, no-load Investment-Only Variable Annuities (IOVAs). When selecting investments, consider ETFs and tax-efficient mutual funds. Consider the timing of decisions to buy and sell investments and methods of harvesting losses.

Asset location is also fundamental to managing taxes, allowing you to diversify clients’ portfolios across taxable, tax-deferred and tax-free accounts to help control how much they pay in taxes—and when those taxes are paid. The first step is to identify assets based on their tax treatment. Certain assets are inherently tax-inefficient—and taxed at a higher rate—such as fixed-income, commodities, REITs, liquid alts and actively traded strategies. These can increase out of pocket costs for clients and decrease performance of their portfolios. By locating tax-inefficient assets in tax-deferred and tax-free accounts, while locating tax-efficient assets in taxable accounts, Millennials can increase their returns—without increasing risk—to potentially accumulate more.

Look to the Future: Reach Millennial Investors

While they are saddled with more debt than the generations before them, and more likely to be paying down student loans than to be paying off a mortgage, Millennials are full of potential, poised to earn more and inherit more wealth in the decades ahead. They are already a significant force in our economy—diverse, well-educated and adept at launching new trends. From the newest streaming service to the shiniest handheld devices, staying one step ahead has been part of their entire lives.

Millennials are a prime target, adaptable and resilient, ripe for guidance and innovative engagement. Yet four in 10 still do not have a financial advisor and could benefit from holistic planning. By understanding Millennials—their unique priorities, preferences and concerns—you can build the trust to effectively reach this emerging market of new investors. Help generate more wealth for this next generation of clients now, and you can build a foundation for the future growth of your firm. ◊