Millennials are often accused of being self-centered and allergic to commitment. They're known for switching jobs every six months and avoiding marriage and kids. But is this really fair?
Cliches abound about the generation whose oldest members were born in the early 1980s. But as more and more millennials enter their 40s, they are proving that they are not so different from the generations before them. They are raising families, buying homes, moving up in their careers and building wealth.
According to research firm Cerulli Associates, the average millennial net worth has increased by 23% each year since 2016, reaching a total of $278,000 in 2021. This is significantly lower than the net worth of Gen Xers (whose net worth averages at $978,964), but millennials have seen the highest growth rate of any generation.
Many millennials are seeking out a financial adviser for the first time as a result of their rising wealth.
If you've never found a trusted adviser before, it can be daunting. Here's a guide to what kind of planner may be a good fit, how to vet them and what it will cost:
If you're looking for a financial planner, a good place to start is by checking out the websites of planner networks like the National Association of Personal Financial Advisors, the Financial Planning Association, the Garrett Planning Network, and the XY Planning Network. You can usually search for planners by specialty (e.g. working with the LGBTQ community, expatriates, or first-generation Americans) or by area of expertise (e.g. taxes, insurance, divorce, or stock options).
When it comes to financial planning, it's important to know what you want to focus on. Do you want to discuss repaying student loans, or the tradeoffs between paying down debt and saving for a down payment on a home? Some advisers offer packages on specific financial issues, so be sure to ask about what's available.
A written financial plan can give you a comprehensive overview of your finances and help you make informed decisions about your money. Prices for financial planning services can vary depending on the level of detail and complexity involved. In some cases, you may be able to implement recommended changes on your own. In other cases, you may need to pay for ongoing assistance from a financial planner.
Sophia Bera Daigle, 38, founder of Gen Y Planning, suggests that instead of spending thousands of dollars a year on ongoing financial planning, a one-time check-in in the area you’re most concerned with can be really great.
You can check an adviser's background by doing a simple LinkedIn search. This will show you their work history and training. If the adviser works for a brokerage house, you can check their experience and disciplinary history on the FINRA search engine. If the adviser is independent, you will need to do a more formal check.
If you're looking for information on an independent registered investment adviser (RIA), the Security & Exchange Commission's Investment Adviser Public Disclosure website is a good place to start.
There are two important documents you'll see there. "Form ADV" shows the number of clients a firm has, assets under management, the fee structure and more. For an even more detailed look, check out a firm's "Part 2 Brochure."
Registered investment advisers (RIAs) are held to the fiduciary standard, which means they are legally required to put their clients' financial interests before their own. In contrast, brokers can invest their clients' money in products that earn them higher fees or commissions as long as the product is considered suitable for the client's age, risk tolerance, and other factors.
Some financial advisers are fiduciaries for the money they manage for clients, but take commissions for selling products like annuities. This means that they are legally bound to act in their clients' best interests, but may have incentives to sell certain products that may not be the best option for the client.
When looking for a financial planner, be sure to check for the CFP designation. Certified financial planners must have a bachelor's degree and complete extensive coursework in areas like retirement and estate planning. They must also pass two three-hour exams and have at least two years of experience in financial planning.
The CFA designation is for chartered financial analysts and is useful if you want someone with expertise in investment management. According to the CFA Institute, becoming a CFA takes an average of more than 1,000 hours of study. CFAs must pass multiple four- to five-hour exams and have four years of professional experience.
If you're searching for help with student loans, you may see the acronym CSLP - certified student loan professional. This designation shows that the person has a good understanding of the complexities of student loans.
If you're looking for tax advice, you may want to consider working with a certified public accountant (CPA) or enrolled agent (EA). For help with life insurance and estate planning, a CLU (chartered life underwriter) is a well-respected credential.
When you've found a few potential financial planners, it's time to set up a call. Some advisers offer free initial consultations, while others charge a small fee.
When you're considering hiring a financial adviser, there are some key questions you should ask them. Find out who their typical clients are and what their philosophy is on financial planning and investing. Ask about how you will meet (many advisers are now 100% virtual) and how often. Find out what they charge for their services. And finally, ask yourself if they are truly listening to you and asking good questions about your values and goals, or if it feels more like a sales pitch.
Jim Marrocco runs Thinking Big Financial, which specializes in LGBTQ customers. He starts every client relationship with a discovery period to better understand their history, values and vision. Marrocco believes that money is such an intimate thing that it is important for clients to feel comfortable in the environment where they are discussing it.
Be clear on fees: The cost of advisers can vary greatly, depending on the complexity of your finances. In general, advisers are paid either by commissions on investments and products, or with a set fee. Those fees can be charged by the hour, month, quarter, year, or by project. If you want someone to manage your money, as opposed to help you with a financial plan, they may charge a percentage of assets managed.
Jeff Jones, director of financial planning at Longview Financial Advisors and chair of the National Association of Personal Financial Advisors, said that rates for financial planners can vary widely depending on the planner's experience, areas of expertise, and the depth and length of the engagement. He added that he has seen hourly rates for financial planners range from $100 to $500, and that project-based and flat fees can range from hundreds to tens of thousands of dollars.
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