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Why Young Executives Are Turning To Financial Planners More Than Ever Before

Why Young Executives Are Turning To Financial Planners More Than Ever Before

Decades ago, financial planning was primarily for the wealthy and those approaching retirement. Middle-class executives and professionals often relied on their family members and friends for financial guidance when needed. However, this seems to be changing — and fast. Now, more than ever, young executives are consulting financial advisors earlier in their careers.

According to a recent study, only 22% of American adults ages 18+ listed a financial advisor as their most trusted source of financial advice in 2020. By 2021, this number had increased to 26%. Additionally, 23% of Gen Z and Millennial study participants reported working with a financial planner.

This trend is promising. Financial planners do tend to be a better source of personalized financial advice than family members, friends, spouses, and blogs. But what’s behind this trend? What factors are causing young professionals to turn to financial advisors like never before? 

Financial Crises Underscore Responsibility

The pandemic and related financial volatility have certainly made Americans more aware of the need for sound financial advice. Between 2020 and 2021, many young professionals changed jobs, faced pay cuts, lost their income, or experienced market volatility with their investments. Those who had a solid financial plan before the pandemic often found that plan would not work in their new circumstances. They started to turn to financial planners for advice in navigating this admittedly confusing and volatile time. 

The pandemic has affected everyone differently, which really increased the need for personalized financial advice. Financial advisors are best equipped to give personalized guidance that takes into account unique and unexpected circumstances such as a job loss, business closure, career change, or unemployment benefits.

And here’s another important factor to consider: for most young professionals, this is the second financial crisis they have faced. Many had recently entered the workforce, or were just entering the workforce, during the 2008 recession. This was an era when jobs were hard to find, wages plummeted, and investment values sank. Young executives who lived through this era of financial turbulence learned, early on, the importance of careful financial planning. So, when the pandemic brought renewed volatility, many knew that it was time to buckle down and make smart, professionally guided choices.

Good Financial Practices Have Changed

Historically, young adults would rely on their parents for financial advice. However, what is considered good financial practices have really changed over the past few decades. Money strategies that worked for your parents’ generation often won’t work in today’s world.  Gen Z and Millennials are very aware of this, which tends to make them hesitant to turn to their parents for advice. Instead, they seek out qualified financial advisors who they trust to give advice relevant to today’s economy and lifestyle.

A good example of how the financial world has changed is student debt. While many people who graduated from college in the 1990s did so with little to no student loan debt, students today are graduating with tens of thousands of dollars in debt — and often more. The cost of a four-year college degree has increased by 25% just since 2008, and student debt has increased by 107% in the same timeframe. A financial plan for a 30-something with $100,000 in student loans looks very different from one for a debt-free professional.

Older parents and family members often struggle to give relevant financial advice since they did not start their own careers with such debts. So, young people are turning to professional financial advisors instead.

The need to save for retirement has also changed with the generations. Many older adults retired with, or will retire with, pension plans. Today’s young professionals often need to save for their own retirement, which greatly impacts their financial planning. Since their parents and other older, trusted adults may not have needed to save so aggressively for retirement, these young professionals consider financial advisors a better source of retirement planning advice.

Finances Are Tighter These Days

As previously mentioned, young professionals are often saddled with student debt. Housing costs have also been steadily increasing since 2012, and they started to increase even faster during the pandemic. These factors, and to a lesser degree, rising food and transportation costs, mean that finances are a lot tighter for young professionals than for those of previous generations.

Many young professionals are earning what most would consider a fair or even generous salary, but still struggling to make ends meet. And when times get tight, they turn to financial professionals to figure out how to improve their financial management.

In the past, many people would only see a financial planner if they wanted to save for something big, plan their investments, or streamline their savings. In 2021, however, 48% of those surveyed listed paying bills and expenses as their top financial planning priority. With finances growing tight for so many young executives, the need for financial advice related to everyday spending and payments has grown. 

Other top financial planning priorities included paying off debts, which 29% of those surveyed listed as a top priority, and investing, which was listed by 32% of participants. There are two possible reasons why people are increasingly seeing financial planners for these purposes. First, the current financial crisis is making people more aware of the importance of planning for future crises. Second, tight finances have made it harder for young professionals to figure out how to pay off debt and invest on their own.

Finding Reliable Sources Is Essential

The internet is full of financial advice and information. However, a lot of it is unreliable. Lots of it is downright wrong or incorrect. And even good financial advice on the internet tends to be pretty general and not necessarily applicable to each individual’s financial situation. 

Younger professionals are often acutely aware of the importance of getting their information from good sources. The problem is, it’s becoming increasingly hard to figure out which sources are good. For scientific information, one can rely on scientific journals to be factual and accurate, but there’s not a great equivalent when it comes to financial information. There are many websites and blogs that, at first glance, appear to be written by qualified individuals. But if you dig a bit deeper, they may actually be written by someone who took a 30-day financial coaching certification course, or worse yet, someone who just woke up in the morning and decided to call themselves a money coach.

Rather than wade through pages of poorly sourced information or spend hours trying to discern which sources are reliable, many young adults are simply turning to financial advisors instead. They know they can count on real financial advisors to give them accurate, educated, informed advice. They also know that advice will be tailored to their own needs, unlike the financial guidance they might read on a random money blog.

Financial Advisors Help Alleviate Stress

One final, somewhat less academic reason why young professionals are increasingly turning to financial advisors is to alleviate worry. Over the past year, especially, people have had plenty to worry about. On top of financial changes brought on by the pandemic, there have been concerns about sending children to school, making wise political choices, and navigating career changes. Some people have undoubtedly begun to work with financial advisors because doing so gives them one less thing to worry about.

Having a plan for your money can certainly alleviate a lot of financial stress, which can help keep your overall stress level more manageable. When you know that plan comes from a reliable, educated financial advisor, you enjoy even more stress relief. Knowing you have an advisor you can call with future money concerns and questions is also a big relief.

With busy schedules, more student debt, and tighter finances, young professionals have enough stress in their lives, even without taking the pandemic into account. With the long-term effects of stress on the body and mind becoming increasingly known, young professionals are aware of the importance of stress management. They’re happy to hire a financial advisor if doing so alleviates some stress.

The trend towards more young executives hiring financial advisors is, without a doubt, a positive one. Personalized financial advice is crucial in today’s world, and it can make all the difference as you continue to plan your career and move closer to retirement. If you are looking for a compassionate financial advisor to help you meet your financial goals, contact RLJ Wealth. We’ll support you along your financial journey, no matter what it looks like.