Most financial planners have no interest in working with millennial clients, according to a recent survey by a consulting firm called Corporate Insight. In fact, the survey of 500 advisors found just 30 percent are attempting to gain clients under age 40.
The reason: Millennials, for the most part, don't have any money. And financial planners make their living by advising wealthy clients.
Well guess what, guys? Millennials aren't interested in their services, either.
Click ahead for 5 reasons why.
The financial industry’s reputation
Millennials are a skeptical bunch in general, but no industry has felt their collective distrust as heavily as the financial services sector. In the aftermath of the Great Recession, movements such as Occupy Wall Street and Bank Transfer Day made it clear generation Y has little faith in the people who manage our nation's money.
"Millennials have watched their parents' retirement take a major hit, so it becomes harder for them to see the value in traditional financial planning," said Aaron Hatch, a certified financial planner and co-founder of Woven Capital. "It's understandable that millennials don't trust financial planners because frankly, they haven't served them well."
Andrew Wang, senior vice president of Runnymede Capital Management, Inc., said millennials value transparency from the people and companies they interact with. "Traditional financial services companies, on the whole, are not delivering on those things," he said.
Although varying levels of skepticism have caused a disconnect between millennials and financial planners, education surrounding the industry is another major divider. "The industry is very confusing to consumers with the ubiquitous title 'financial advisor,'" explained Wang, "which actually includes a very diverse group of professionals such as brokers, financial planners, insurance agents, investment managers and bankers -- each paid differently."
Some millennials who would be excellent candidates for financial planning services never take advantage because they don't understand what it entails, the benefits of hiring a financial professional or even what type of professional they need.
Financial planning fees
Then there's the matter of payment. Young adults also tend not to work with traditional financial planners for the same reason these advisors dismiss them: Money (or lack thereof).
Stephanie Genkin, an independent fee-only financial advisor who teaches personal finance classes popular with millennials, said the problem is the traditional fee structure of the industry. "Most financial planners earn their living from assets under management (AUM) and charge a percentage of their clients' investments." She noted that clients with smaller portfolios are typically charged a higher percentage to compensate. "This works against millennials who are at the early stages of building an investment portfolio."
Diversity is not a word often associated with the financial services industry. While there are financial planners of all nationalities, genders and backgrounds, a good portion are old, white men. InvestmentNews says 76 percent of financial planners are male. Just 8 percent belong to a minority group. That doesn't discredit these advisors by any means, but it does make it that much more difficult for today's 20-somethings to find any kind of connection.
Age alone plays a major role in millennials' unwillingness to work with financial planners. "There are more CFPs over age 70 than under 30," noted Andrew Mohrmann, a CFP and founder of Modern Dollar Planning. "This generational gap means that most planners simply can't relate. Try discussing the dating challenges of Tinder and Match.com with a 70-year-old!"
Financial planning information is free online
As the first wave of digital natives, millennials are an incredibly resourceful generation who would rather seek information for themselves than be told what is true. Therefore, Gen Y is more apt to gain financial knowledge and insight from sources outside of formal planners.
"Many turn to the internet, close friends and family for advice and help gaining entry to the market," said Alison Novak, professor in media studies and production at Temple University. "This type of independence from formal financial organizations helps them assert independence from the financial sector."
Final thought: Financial planning for millennials can work
Despite all of the challenges preventing millennials from working with financial planners, there are plenty of reasons why younger generations should pursue professional assistance with their finances. Fortunately, leaders in the modern financial planning industry are making that possible by changing the old business model.
"There are now hourly and subscription-based financial planning models that can allow planners to work with people that haven't accumulated a big portfolio that needs managing," explained Eric Nicewarner, a certified financial planner. "It also allows those people access to the other benefits a planner can provide, like debt reduction strategies, saving and budgeting techniques and insurance planning."
And for the internet-averse millennial crowd (yes, they do exist), working with a traditional financial planner still has its advantages. "Millennials who are interested in working with a financial planner should seek out a credentialed planner who charges an hourly rate," said Genkin." Millennials would benefit from an initial series of meetings and then annual or semiannual checkups, unless their situation changes, such as a new job, new business venture, home purchase, marriage or a baby."
Despite all the reasons millennials and financial planners have to avoid working together, those reasons are largely based on assumptions. The best thing a person in need of counsel can do, regardless of age, is actually schedule time with a financial planner and talk. Most planners offer free consultations; the worst thing that can happen is you waste an hour, but you could end up gaining invaluable insight from a pro.