Given the rising living costs and the millennials desire to keep up with their peers in terms of maintaining a lifestyle, savings for most millennials is not a priority. Owning a car, gadgets, clothing and planning a holiday abroad are the top priorities of millennials these days.
A recent video published by Cafemutual shows that most millennials depend on IFAs for investment decisions.
So let us see how advisors have helped millennial clients save more.
Millennials appreciate when they can accomplish all tasks on a mobile application, says Gajendra Kothari, Etica Wealth Management, Mumbai
Individuals in the age group of 23-38 are more tech-savvy and tend to easily believe online content. Hence, It is challenging to work with millennials as they give more weight to google answers than an individual with experience.
Besides, for such clients, near term goals are priorities while they are least bothered about retirement planning.
Millennial clients usually have many questions to ask since they do a lot of online research before approaching advisors. To answer all their questions I follow this approach:
- I recommend the movie ‘One Idiot’ to them as this educational film from IDFC explains the importance of being financially independent for youth
- Since most millennial clients seek quick returns in the short term, I explain to them how high returns are only possible if they stay invested for at least 5 years
- Given such clients avoid lump sum investment, SIP is very suitable for them. SIP also help as it forces them to save. Otherwise, for most millennials, it is very difficult to hold themselves from spending their salary as soon as it is credited.
- Finally, I make it convenient to accomplish all tasks related to invested through an app. So whether it is making investments or redeeming them or viewing their accounts, our app makes it all possible.
Near term goals, a top priority for millennials not retirement planning, says Suresh Sadagopan, Ladder7 Financial Advisories, Mumbai
I second Gajendra’s views on the short- term horizon of millennials; my experience too suggests that millennials usually tend to focus on near term goals rather than the long term. Buying the latest gadget, high-end two-wheeler and planning a vacation is more important to them than planning for retirement.
Hence, when a millennial client approaches me, I begin with testing their level of awareness about mutual funds. Since millennials are usually in their initial phase of career, their salaries jump almost 30-40% after a few years of working. In such a phase, they prefer to spend more on lifestyle and fulfil other near term goals rather than investing in the future.
One common question such investors ask me is ‘How much will be the returns?’
Here is the process I adopt to make them understand investment:
- I answer their basic questions like what is a MF, how do investments in equity, debt funds work, what are the past performances of these funds, the difference between FD and MF schemes, etc.
- Most millennials are very much open to the idea of credit through their experience with credit cards and other digital platforms. Hence my priority is to make them understand how loans spiral in months if not backed with savings
- Later I suggest them to build a kitty of 2-3 lakhs, which would suffice for their near to medium-term goals. This also helps them to save more from their monthly income
- I advise to invest a portion of their salary in a mix of debt and equity schemes instead of spending it recklessly
