Helping Gen Z clients find financial balance

While clients of all ages feel the pressure to keep up with the Joneses, younger people who are more exposed to social media content are especially vulnerable, said Shawn Filion, a senior advisor with Desjardins Wealth in Cornwall, Ont. Content glamourizing spending comes at them on the same platforms that offer up dubious financial influencer content.

Over half (53%) of Canadians born 1997 or later said they felt compelled to project a certain financial image on social media, higher than Millennials (45%), Gen X (23%) and Boomers (14%), according to an October TD survey. While one-fifth (19%) are interested in home ownership, 50% admitted to splurging on travel and eating out more regularly.

At the same time, longer-term goals like retirement require more private savings as defined-benefit pension plans are disappearing and housing prices have far outpaced inflation, said Kate Childerhose, a financial advisor with Edward Jones in London, Ont. “It’s not necessarily frivolous or silly spending; it’s just that they have so many more competing priorities than the older generations had.”

Advisors experienced in working with younger clients say the key is to counter the bad advice they’re exposed to with good advice, pay attention to changing attitudes to money as the client’s income grows and help them find balance between having fun and building a nest egg.

Dispel misconceptions, build confidence

Younger clients are more financially aware than previous generations when they were at the same age, but they could be consuming largely unlicensed finfluencer content, piquing their interest in cryptocurrencies or other speculative investments, said Leslie Logan, a senior financial planner with TD Wealth in Toronto. When clients have questions along these lines, advisors should explain why those investments might not be right for the client’s particular goals, she said.

It’s not just social media; a client’s financial mindset can be influenced by friends who may be at different stages in life. But what might work for their peers might not work for them, Childerhose said. If a client mentions an unsuitable financial strategy, ask them where they got the information from and start dispelling bad advice with good advice, she said.

Meanwhile, some parents try to give adult children good financial advice but have a hard time talking about money at home, so they turn to their advisor for help, Childerhose said. “I can tell my children things until I’m blue in the face. They may not listen to me, but they usually listen to someone else.”

The objective is to give the young person enough good advice to be confident in making financial choices on their own, Childerhose said.

Attitudes to money change over time

A young client’s needs and attitude to money can change quickly in their 20s and 30s. Early on in their financial journey, a Gen Z client may worry that a single misstep will set them back, so advisors need to explain basic financial concepts to help them build foundational knowledge, Logan said.

When young clients get their first full-time job, they often overlook employment benefits, including valuable stock options and pension plan opt-ins, Logan said. “Sometimes, [stocks] aren’t vested for two years, so you can’t even touch it, but those kinds of things can go a really long way.”

Advisors should create a safe space so clients feel comfortable sharing their goals and challenges as they change, as well as any financial questions they may have, Filion said.

And when they get a raise, Childerhose advises talking about how they want to use it and whether it is enough to cover inflation. Clients may observe that some prices outpace inflation and want to plan for it.

Find balance and make saving fun

A younger client might be looking at home ownership in the medium term but still want to “experience life now” with a vacation, Logan said. Getting a client to prioritize and understand the impact current spending can have on future goals feels like a “push and pull.”

Childerhose breaks spending priorities down to must-haves and nice-to-haves. She then helps clients visualize how current spending impacts future savings by beaming illustrations onto a 60-inch screen in her office and watches the client’s “light bulb turn on.”

Advisors can also suggest that clients set up automatic savings to fund different goals, and break down financial objectives to help make future needs less abstract. One of Logan’s Gen Z clients recently shelled out for tickets to a Toronto Blue Jays World Series game, but the pricey purchase didn’t impact their long-term savings as it came from a “splurge account.”

In addition, Filion said advisors can motivate clients by gamifying the savings experience, for example by comparing an increasing net worth to a gaming streak. For example, advisors can help the client set challenges with intermediate savings milestones towards reaching their first million dollars.

When a client reaches an intermediate milestone, make sure to congratulate them on their progress, Fillion added. “[It’s] very rewarding for clients, but also very rewarding for advisors.”

The bilingual online TD survey was conducted from July 28 to 29 by Edelman Data & Intelligence using the Harris Poll Omni with a nationally representative sample of 3,037 Canadians. Within this group, nearly 500 respondents were aged 18 to 28.

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