It’s easy to overlook the Millennial generation as a marketing opportunity for financial advisors. After all, many Millennials are strapped with college debt, living in their parents’ basements, and frustrated with coming of age during the Great Recession. They are also known for being independent thinkers, or at best, reluctant to response to marketing campaigns.
Yet, from a long-term perspective, pursuing Millennials--or at least the more successful ones--can be an attractive strategy. Many advisors have aging clients who are likely to have Millennial children as estate beneficiaries. Therefore, being able to market to the youthful generation is essential. Additionally, some Millennials will advance in their careers and develop financial planning needs.
For advisors, one strategy for pursuing Millennials as clients is to emphasize one of the biggest advantages that the generation has when it comes to prepare for retirement: time.
Since Millennials are typically defined as having been born between 1980 and 2000, many have a long-term horizon for saving for retirement. Yet, many believe Millennials, who are paying off college debt and struggling to advance in their careers, will need to work considerably longer than their parents before being able to retire.
Advisors who can help Millennials develop a more favorable outlook for retirement can have an advantage in marketing to the generation. With that in mind, advisors should be prepared to help Millennials with budgeting, debt management, and retirement planning.
One compelling strategy is to illustrate the importance of not delaying saving for retirement. For example, an individual age 26 earning $70,000 annually, who deposits only 5% of his or her salary into a 401(k) plan with a 50% company matching contribution can expect to have a nest egg totaling $1,740,300 at 67 years old. That is the full Social Security age.
The illustration assumes a 7% annual investment return and a 3% salary increase each year. Assuming the individual withdrawals 4% from the nest egg each year, the account could provide annual income of $69,615 before taxes and not adjusted for inflation.
By waiting until age 30, the next egg would only grow to $1,270,266, which could provide an annual income of $50,800. Waiting an additional five years until the age of 35 would result in the nest egg shrinking to only $844,858. That would provide an income of only $33,794 annually, which is less than half of the income that could have potentially resulted from starting to save at age 26.
For many Millennials, of course, being able to fund a 401(k) will be challenging, so advisors should emphasize that even making small retirement savings contributions is preferable to delaying the start of retirement planning. In addition, advisors should promote the tax savings that individuals can receive from making pre-tax plan contributions.
Advisors should also be prepared to help with budgeting and be able to provide suggestions for how individuals may be able to cut expenses. Millennials are often characterized as being ambivalent about purchasing big ticket items, such as cars and even houses, so many may be receptive to finding ways to cut their expenses.
With Millennials being tech savvy, advisors should provide retirement savings illustrations on their websites and use social media marketing to promote the merits of having a long-term investment horizon. Millennials also place substantial emphasize on web-based customer reviews, so it’s important for advisors to have testimonials and client references.