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Nivesh Jaagran Financial planning tips for millennial clients

Financial planning tips for millennial clients

Advisers should help millennials identify their short-term goals to encourage them to start investments.
Team Cafemutual Jan 18, 2018

A white paper released by Penton Financial Services shows that with millennials creating wealth, it is time for advisors to shift their focus. It is not just baby boomers and middle-aged men who control wealth, millennials now make significant salaries sooner than previous generations, while also inheriting from their affluent parents.

Yet the financial advisors have not adapted to these shifting demographics, preferring to focus their attention on the patriarchs who historically have created and controlled wealth, says the white paper.

Millennials refers to the generation, which is between the age of 20 and 37. India has a large number of millennial population.

Here are some pointers to help you plan for your millennials clients effectively:

Set their expectation right

Shalini Dhawan of PlanAhead Wealth Advisors says that millennial clients have a lot of unrealistic expectation from the performance of funds. “Millennials do online research from various websites and generally believe that mutual funds can make them rich overnight. Advisors need to explain to them the concept of mutual funds and set the expectation right from the beginning.”

Focus on their short-term goals

Advisers should help millennials identify their short-term goals to encourage them to start investments.

Sharing his experience, Amol Joshi of PlanRupee says that “I first ask millennials about their short term goals. Most of them want either to buy fancy bikes and gadget or foreign holiday. These conversations help them get comfortable with us. Eventually, you can encourage them to look at long term goals”

Start with a debt fund

Shalini says that in order to make investors have a good first time experience, she recommends liquid and income funds to her clients.

“Most millennials have savings in RDs and FDs. Though they are familiar with mutual funds, they are not comfortable investing in it due to risk associated with it. We explain to them the difference between returns generated by FDs, RDs and income funds. We also make them understand about the taxation benefits they get in debt funds compared to bank FDs,” said Shalini.

Joshi said, “Liquid fund could be the first step to invest in mutual funds. Once they experience mutual funds, they will invest in other schemes like equity funds and debt funds.”

Asset allocation is a must

Advisors feel that asset allocation can help millennials get stable returns from their portfolio.

Joshi pointed out that millennials, irrespective of their risk appetite, want to remain fully invested in equities to earn attractive returns. “Since millennials are yet to witness any market cycle, they may be very optimistic in their investment approach. Hence, I do their risk profiling through a set of questionnaires to understand their risk appetite. Based on the result, I explain to them about the significance of asset allocation in investments. I also give them case studies on how their debt investments can help them during difficult times.”

Early retirement

Advisors say many millennials want to retire early. One way to attract millennial clients is to talk about early retirement and how investing in mutual funds can help them retire early from their professional life, said AK Narayan of AK Narayan Associates.

“Though a part of their income goes into provident fund, it is generally not adequate to take care of their early retirement. To start with, I tell my clients to invest a small corpus say 10% of their total investible corpus for retirement. As the clients become aware of the benefits, they gradually increase their monthly contribution for retirement corpus,” said A K Narayan.


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