The constantly changing financial landscape throughout the years have molded the younger generation with a different outlook and priority than that of their parents.

As financially-savvy individuals actively interested in managing our own personal finances, we are keenly aware of the rapidly changing landscape in personal finance. A significant part of this change comes from the evolving financial needs and behaviours of younger generations, particularly millennials and Generation Z (Gen Z).

With technology reshaping how we manage and plan our finances, understanding these generations is essential to tailoring effective financial advice, whether as financial professionals or as family elders.

Recognizing the Younger Generations and Their Financial Characteristics

Millennials, typically identified as those born between the early 1980s to the mid-1990s, witnessed a dramatic shift in technology during their formative years. The advent of the Internet, the emergence of personal computers, and later, the ubiquity of smartphones, have all played substantial roles in shaping this generation’s interaction with the world.

In terms of financial behaviour, millennials are often characterized as tech-adaptors. They have seen a world both with and without online banking, and as such, they’ve been a driving force behind the acceptance and growth of digital financial services. These are the generations that witnessed their parents navigate the 2008 financial crisis and saw first-hand the impact of not having a solid financial plan in place.

Having come of age during the 2008 financial crisis, millennials understood the importance of financial planning, diversification, and risk management at a relatively early age. Consequently, they are increasingly financially savvy and more inclined to actively manage their finances from an early age.

Gen Z, born from the mid-1990s to the early 2010s, are the first generation to grow up in a truly digital world. For them, technology is not an added layer of their existence; it is thoroughly woven into their lives. They are digital natives. Their relationship with technology, therefore, is fundamentally different from previous generations.

Financially, Gen Z’s have a heightened awareness of the importance of personal finance, thanks in large part to the ease of access to information online. Moreover, having observed the millennial struggle with student loans and challenging job markets, many Gen Z’s are proactive about avoiding similar pitfalls. They’re more likely to seek information about personal finance, budgeting, and investing from a young age.

The Needs and Wants of the Younger Generations

These younger generations’ financial needs and behaviours vary greatly from their predecessors. They are more inclined towards digital financial services, with a KPMG study showing that 67% of millennials prefer digital banking. They value convenience, speed, and 24/7 accessibility, which are hallmarks of digital services.

It’s worth noting that this tech-savviness does not replace the need for human interaction. These generations still value advice and insights from trusted human advisors, especially for complex financial decisions. However, they prefer a blend of human and digital interaction, expecting their financial advisors to be as tech-forward as they are.

Moreover, they place a strong emphasis on financial wellness and independence. A report from Bank of America indicates that 73% of millennials are saving for a specific goal, compared to just 57% of Gen X. Gen Z, still largely students or early in their careers, are keen on saving and investing, demonstrating financial maturity at an early age.

Yet, these generations are also saddled with unique financial challenges. They are often burdened with student debt, face skyrocketing property prices, and grapple with a volatile job market. This financial landscape requires tailored advice, taking into consideration their long-term financial goals, existing financial burdens, and preferred digital platforms.

Adapting Our Advisory Methods

To effectively engage and assist millennials and Gen Z in their financial journey, we need to adapt and reframe our advisory roles. The approach should be more of a partnership, providing not just financial advice but also financial education to empower these individuals in their financial decisions.

It is recommended to integrate technology into our service delivery, utilising digital tools to enhance our engagement with these tech-savvy clients. Providing advice on a range of digital platforms, from email and mobile apps to video calls and social media, can make financial planning more convenient and engaging for them.

We should also acknowledge and support their focus on financial wellness, offering advice on managing student loans, saving for retirement, or planning for first-time home purchases. The key is to help them balance their immediate financial needs with their long-term financial goals.

Moreover, we need to understand their interest in socially responsible investing. According to a survey by Morgan Stanley, nearly 90% of millennials are interested in sustainable investing. Tailoring advice to include ESG (Environmental, Social, Governance) investment opportunities can cater to this preference.

The Road Ahead

Millennials and Gen Z are not just the future of our economy; they are actively shaping it. By understanding their needs and preferences, we can provide financial advice that speaks directly to them and assists them in their financial journey. This requires us, as financial advisors, to embrace change, harness technology, and align our strategies with their needs.

Just as a wise sailor adjusts the sails to suit the wind, we too must adjust our strategies to suit the changing landscape of personal finance. As we steer our clients towards their financial goals, we must remember that the journey is as important as the destination. Our role is not just to guide them, but to empower them, equipping them with the knowledge, tools, and confidence to navigate their financial future.

Conclusion

In this era of technological innovation and financial change, we can adapt to better shape a more inclusive, sustainable, and prosperous financial future for all. For in the words of Franklin D. Roosevelt, “We cannot always build the future for our youth, but we can build our youth for the future.”. By changing our approach with awareness of how generations think differently, we can better help each other.

 

Are you ready to meet the challenges and demands of the future generation? Let us know in the comments down below.