Older adults often give Gen Z a bad rap as the generation of lazy freeloaders who have no interest in managing their finances. However, that’s not the case at all. Many are eager to boost their financial knowledge and make well-informed decisions about budgeting, debt management, and investments.
A lot of Gen Zers are learning what they can about financial planning from digital platforms like YouTube and TikTok, but what they really want is someone who knows the ins and outs of money management and can guide them toward smart decisions regarding debt management, budgeting, taxes, and investments.
According to Eric Simonson, Founder of Abundo Wealth, “We work with many Gen Z clients, and far and away, the biggest thing they are looking for is transparency with pricing and user-friendly financial planning technology that they can access on their own between meetings.”
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Gen Z Debt Explained
Many Gen Zers will admit they do not fully understand how debt works, especially credit cards and personal loans, but you should not hide from debt and what it means. Parents avoid teaching their children about borrowing options in hopes that it will deter them from swimming in debt. Yet you need at least some debt history to establish a credit score worthy of making a major purchase.
Financial advisors can help Gen Z individuals learn how to borrow responsibly, and provide recommendations on credit cards or loans that can help boost credit scores without spiraling out of control. Similarly, advisors can explain how to borrow within your means and read the fine print on loan paperwork to determine interest rates, origination fees, and other hidden costs.
Helping Gen Z Lower Monthly Expenses
Given that inflation is at an all-time high, most people are concerned about their personal finances. What’s more, Gen Zers believe their financial situation is more complicated than previous generations due to the ever-increasing cost of living and lack of growth opportunities within major corporations. So, they need a financial advisor who can help them find ways to cut down on expenses so they can stretch their paycheck as much as possible.
In many cases, removing temptation and sticking to a strict budget is an easy place to cut back. You can do this by deleting convenience apps and curbing online shopping habits. Furthermore, you can take a hard look at your budget and remove things that aren’t really a necessity, like subscriptions, dining out, and travel. These small changes can lower monthly expenses by hundreds of dollars per month.
Gen Zers can also lower their monthly expenses by making smart decisions when it comes to debt management. For example, the average Gen Z college graduate has between $10,000 and $20,000 of student loan debt. However, refinancing these loans can help save money with lower interest rates and combine multiple balances into a single lower monthly payment. Of course, there are also several old-school ways to lower monthly expenses too, like ride-sharing or clipping coupons. These methods aren’t as fun, but every little bit can help.
Getting Advice from Gen Z Financial Professionals
Finally, Gen Zers are more active investors than previous generations because they know that Social Security won’t pay the bills by the time they age out of the workforce and need to take matters into their own hands. This means they want a financial advisor who knows the ins and outs of smart investment options so they can make the best possible financial decisions to provide dividends upon retirement.
Financial advisors who want to work with the Gen Z crowd will need to be well-versed in cryptocurrency, NFTs, and other investment trends. Furthermore, advisors will need to offer options that are outside of the box and seem enticing, since they are less likely to buy into any types of investments they see as outdated or lacking in future potential. Gen Z also has a keen interest in aligning their investments with their beliefs and values.
“We are recognizing that Gen Z wants to align its investments with its values,” says Darryl W Lyons, cofounder and CEO of PAX Financial Group. “Our company has been getting a lot of traction in the Biblical Responsible Investing space,” he says.
Helping Gen Z Maximize Tax Savings
Believe it or not, nearly half of all Gen Z individuals in the workforce are self-employed. However, very few of them understand tax law, meaning they don’t know how to maximize tax returns each year — and this lack of knowledge can cost a single freelancer thousands of dollars in tax payments each year.
Therefore, they are not just looking for someone who can help them invest their money. They want a financial advisor who can help them comb through their business expenses and find ways to translate these necessities into tax write-offs. The more money an advisor can help someone keep their money away from Uncle Sam, the more they can turn around and invest. Some smart tax moves that many may not know about include their ability to deduct a percentage of their home’s square footage and utilities for work purposes, counting their insurance premiums towards business expenses, and paying quarterly taxes to avoid penalty fees.
ASK THE EXPERTS
Q: As a financial advisor working with Gen Z clients, what have you learned about their needs and interests that’s helped you succeed with this demographic?
We asked Michael Raimondi, Wealth Manager with Clarus Group to answer this question. Here’s what he said.
There seems to be an underlying stigma that Gen Z was handed an already crippling economy. They feel betrayed and neglected. Their trust is generally low and its even lower for financial professionals.
Gen Z’s spending behaviors, life goals, and mindset is drastically different from the generations before them. Where a previous measure of success was a big house and a fancy car, Gen Z seeks the freedom of choice and is less bound by expectations of what they should do and is more interested in what fulfills them.
Approaching a GenZ client with objectivity is critical. To quote one of my Gen Z clients, “We need love and guidance.” It’s important to note the modern social construct that forges their general psychological behavior.
Gen Z came into this world with an unprecedented and never-ending onslaught of new ideas, creations and trends pushed via social media. Financial literacy, or even just the concept of financial literacy, was totally overlooked and neglected in most Gen Z’s upbringings. They don’t know what they don’t know, what they want/need to know, and don’t know if they’re even doing the right thing.
The opposite of the constant onslaught of information in their face is a personal connection with someone who strives to get to know their unique circumstances and desires. Someone who is a partner with them along the way is often what GenZ craves, but what they rarely will express.
Michael Raimondi, MFA, CFP® | Clarus Group
🙋♀️ Have Questions About Gen Z Financial Planning?
Smart Tips for Finding a Gen Z Financial Advisor
Before hiring a financial advisor, here are a few quick tips to help you find the best advisor for you.
1. Decide Which Services You Need
Before hiring an advisor, determine what services you need from them. Whether it’s full-service investment management or a plan focused on a specific area of your finances, put together a list of what you’d like help with before contacting an advisor.
Though most people use a financial planner simply to invest for retirement, this is only a small part of what many advisors offer. Here’s a quick rundown of potential services a financial advisor may offer you:
- Budgeting and money management
- Debt management
- Insurance planning
- Retirement planning
- Other investment planning
- Inheritance planning
- Estate planning
- Tax planning
As you can see, financial advisors can help you with your entire financial picture, not just investing. As you start to plan for life’s bigger milestones, you should consider finding a financial advisor that specializes in those areas.
Finding the right advisor can help you minimize risk, maximize gains and take advantage of tax breaks while investing for your future. They can also help you protect your assets with the right kinds of insurance and help you pass on your financial legacy with a proper estate plan.
2. Consider Your Budget and Payment Preferences
Once you have a list of services you would like, review the fee structures financial advisors offer. Finding a balance between the services you need and the cost of those services will help narrow down the field of advisors you may want to work with.
If you are looking for a full-service advisor to manage all of your investments, consider searching among fee-based financial advisors. If you want to manage your money yourself, consider the flat fee and monthly subscription advisors for ongoing support.
3. Interview Multiple Financial Advisors
Once you have chosen the services and fee structure you prefer, it’s time to contact a few advisors and interview them. Here are questions to ask financial advisors:
- What services do you provide?
- What are all the ways you get paid? (fee transparency)
- What is your investment strategy?
- How do you measure investment performance?
- How do we communicate about my plan?
Interview multiple advisors to get a feel for who you want to work with. A combination of fees, services, and customer service will help you determine the best fit for your financial advice.
4. Review Financial Advisor Credentials
Once you find an advisor (or two) you feel comfortable with, it’s always a good practice to check their credentials and the firm’s details. You can do this at the Investment Adviser Public Disclosure (IAPD) website.
You can check both the individual and the firm to view their background and experience details, as well as any disciplinary action taken against them or their firm.
As licensed financial professionals, there is oversight into how financial advisors conduct business, so running a quick (free) check on them is recommended.
For additional information about advisor credentials, read our article to learn the most popular designations held by financial advisors, as well as specialized credentials which may be important to consider if you have unique financial planning needs.
Frequently Asked Questions & Additional Resources
How do I know if I’m ready to hire a financial advisor?
You should strongly consider hiring a financial advisor if you have a significant amount of money available for saving or investing. This could occur after years of making annual contributions to a retirement plan like a 401(k) through your employer or suddenly if you receive a large inheritance or sell your house for a large profit.
But even if you don’t have a lot of money saved, many financial advisors and planners provide reasonable pricing options and valuable services you should consider, especially if you’re facing a significant life event. For example, if you’re starting a new job, getting married, starting a family, getting divorced, lost your job, starting or selling a business, or approaching retirement age, working with a trusted financial advisor or planner may prove worthwhile.
Before I hire a new financial advisor, should I fire my current advisor?
You don’t need to fire your current advisor before beginning your search for a new financial advisor. In fact, your new advisor can help coordinate the transition of your assets from your previous financial advisor.
Where can I read reviews about financial advisors written by their clients to help me decide if I should hire them?
After 60 years of regulatory prohibition of financial advisor reviews in the US, a rule issued by the Securities and Exchange Commission (SEC) became effective on May 4, 2021 that means both financial advisors and directory websites that help consumers search for a financial advisor can collect and display financial advisor reviews, an important factor worth considering when choosing who you’ll hire to manage your investments and life savings.
Wealthtender is the first independent advisor review platform designed to be fully compliant with the new SEC rule, and we look forward to helping you evaluate financial advisors based on reviews written by their clients.
I’m a financial advisor interested in being featured in this guide. How do I get started?
Thanks for your interest. We look forward to learning more about your practice and helping you attract your ideal clients where you may be a good fit based on their individual needs and circumstances. Please click here to learn how you can join local financial advisors featured on Wealthtender.
About the Author
Rick Orford
Rick Orford is a two-time best-selling author (his books have become Wall Street Journal, USA Today, and Amazon best sellers), investor, and mentor.