Millennials and Gen Z are looking more for financial coaching than portfolio management.
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Financial planning has traditionally been reserved for people with over $100,000 who have portfolios.
However, many young CFPs realize this leaves many poorer millennials and zoomers in the dust.
Focusing on financial coaching and helping clients hit goals has become a much bigger priority.
The economic situation of millennials and Generation Z is very different from the economy that previous generations have enjoyed.
One study from 2020 indicated that even though millennials make up the majority of the workforce, they are still ten times poorer than the Baby Boomer generation.
This is even despite the fact that some data suggests that millennials actually earn more at their age, but still hold significantly less wealth because this rise in income cannot keep up with the pace of increased costs of living.
This departure from previous norms has led to a gap in the utilization of financial services. With less income, there is less reason for younger generations to hire a financial planner. The certified financial planning board has acknowledged this, and in recent years has dedicated more space to discuss what to do in order to fill this gap.
While “financial advisor” can serve as a more generic term for any professional who helps clients with their assets and investments, a financial planner is a specific title that comes with a certification that requires the planner to undergo a certain amount of working hours and have a certain amount of financial education before they can take on the title.
Many financial planners often focus on simply growing a clients’ investment portfolio, and oftentimes firms will require a potential client to already have a net worth of several hundred thousand dollars before they will take them on, making financial planning prohibitively expensive for people in a country where about 25% of people don’t even have any emergency fund savings.
In response to this, there has been an explosion in popularity for a field known as financial coaching. This is not the same thing as financial planning, or even really “financial advising” — financial coaching is a more holistic approach to helping clients grow their wealth.
While a financial planner or advisor might be more focused on the returns that your retirement account is getting and what its asset allocation is, a financial coach is there to help you work through your emotional hang ups about money, set a budget, formulate goals for your savings, and help you reach those goals.
However, financial coaching is a largely unregulated industry, and doesn’t really require much in the way of credentials in order to become one. This field is also often closely linked to the growth in personal finance influencers, who talk about making and reaching savings goals and growing your net worth.
That said, it’s still a very popular service despite the lack of regulation and formal expertise of many financial coaches — some of whom have grown very lucrative businesses offering this service.
Younger financial planners are discovering this as they’ve entered the field, and as a result, many of them are rethinking what it is that they have to offer their peers as a financial planner. Insider spoke to three certified financial planners over the last few months, and they all shared insights about their field, and how it’s affected the way that they approach their practice.
Colin Overweg.
Courtesy of Colin Overweg
Investment management is so easy ‘a robot can do it’
Colin Overweg, 29, is a financial planner from California who has an all-virtual practice called Advize Wealth, where he chooses to help clients focus more holistically on their finances instead of just managing their investments.
In fact, Overweg suggests openly that most people should think twice about hiring a financial planner who is only monitoring their portfolio, stating that this task is “so easy a robot could do it.”
There is definitely a different type of need in services for younger demographics,” Overweg said. “The investment management tools and resources out there now are so much better than they’ve ever been.”
He is a big fan of robo-advisor platforms as a low-cost, simple way for people to start investing and encourages most people to take advantage of these new tools that cost a fraction of what a portfolio advisor’s fee would be.
In fact, Overweg said that things have improved so much that he believes that the average person has more powerful tools at their disposal than “the wealthiest of the wealthy had 10, 15, or 20 years ago.”
“But most people just don’t know how to apply these tools to their specific situation,” Overweg added. “And that is really the gap that I’m trying to fill — the advice-only space.”
Overweg said that instead of focusing on managing a portfolio, he will steer clients toward utilizing a robo-platform, and then focus on other issues, like whether or not the client should be focusing more on investing or more on paying down their debts, or helping them navigate a step-by-step plan for achieving their goal of buying their first home.
Brittney Castro
Brittney Castro
Coaching and consulting is where planners can add value
According to certified financial planner Brittney Castro, 38, these kinds of services are where financial planners can actually provide value-add to their clients’ financial lives.
Castro began her career as a financial advisor and then certified planner over 15 years ago, but hasn’t been seeing clients in recent years, as she pivots her attention toward financial education content on social media.
She said that she loves doing content creation and likes the freedom and flexibility that this career shift gives her, adding that she believes this material is also educational and helpful and that her certification and past experience with clients adds to her credibility.
“Our value is in educating and helping clients with strategy,” Castro said. “I think that coaching model is more popular because it’s more holistic. Especially with this younger generation, that’s what we want — someone who’s helping us think about money and our decisions every day — as well as telling us how to allocate our portfolio.”
Castro also believes that this coaching model creates an ongoing relationship between the planner and client that can last for decades, and mutually benefit both parties.
“There’s never some final destination, because once you get to whatever goal you have, there will be a new goal, or challenge,” Castro said. “This is an ongoing relationship, and things change all the time.”
She then said that emerging technologies like Venmo, Zelle, robo investing, and cryptocurrency means that financial planners need to remain educated and flexible, in order for their advice to clients to remain relevant.
“No matter if you have a negative balance in your account or $20 million, there’s always something to learn to manage, to improve on,” she added.
Nate Hoskin, CFP
Courtesy of Nate Hoskin
Financial services are gate kept from general public and it makes income inequality worse
Nate Hoskin, 24, is one of the youngest financial planners in the United States. He has his own growing firm, Hoskin Capital, and focuses a lot of his attention on the needs of millennial and Generation Z clients.
This includes new developments in the ability to save for retirement and achieve financial stability in the face of multiple recessions, economic impacts from climate change, and the changes to what employers offer their workers in terms of benefits and retirement accounts.
Hoskin has said that Gen Z needs to radically rethink how they’re going to retire in the face of this new economy, and strongly suggests taking time to develop multiple streams of income that can continue to serve you as you attempt to move farther away from holding a traditional 9-to-5 job.
He doesn’t just dispense this advice — he also lives it. In addition to his firm, Hoskin also has a 9-to-5 where he counsels clients who are in some of the lowest tax brackets in this country, and helps them get from crisis to crisis when it comes to feeding kids and keeping a roof over their heads.
“I am here to help people who don’t traditionally get access to financial advice because I saw how simple it was because of my previous jobs,” Hoskin said, who has worked for hedge funds in the past. “We were working with multimillionaires, and I saw the systems that they were using and what was available to them.”
Hoskin said that these resources can potentially be available to everyone, but are often “gate kept” because it’s not as profitable to work for clients that have lower incomes.
Hoskin said that with his own firm, he’s less interested in maximizing his own income as much as possible, and wants to focus on providing services that have never existed before for the populations that he caters to.
“Inevitably it’s going to make me some money,” Hoskin said. We’re going to be charging subscriptions and managing people’s money — and that money is going to grow — but I have no interest in trying to sell this company for $100 million or anything like that.”