Financial Planning for the Younger Client, Part 2: Beyond the Basics

Posted by Rose Watson, JD, MSEL

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April 10, 2015 at 9:30 AM

financial planning for the younger clientIn part 1 of this post, I discussed the basics of financial planning for the younger client. And while it's important to address the fundamentals of spending and saving, what other financial needs should you discuss with your millennial clients?

Here, the focus is on asset protection planning for the next generationthat is, estate planning and insurance coverage, as well as how you might charge for these services. Let's move beyond the basics of financial planning for the younger client.

Asset Protection Planning

As the 2014 Wells Fargo Millennial Study notes, this group is optimistic about their future prospects and their ability to control their financial situations. Addressing their estate planning and insurance needs is a great way to protect their dreams for the future.

Estate planning is for the young. Everyone needs an estate plan; most young people need only a simple one. Because millennials may be looking for the easiest, most cost-effective option, they're likely to gravitate toward do-it-yourself online resources. Unfortunately, too much information is lost by online questionnaires, and the offerings tend to be cookie-cutter planning, sometimes with the option to contact a local attorney. Instead of letting your clients go that route, why not take charge of their estate planning from the start?

  • Identify your client's needs. As you get to know your client's basic financial picture, start talking about his or her estate planning goals. Topics can be as simple as naming someone to turn to in a time of need or discussing who should be put in charge of the client's estate. Sometimes, the simplest of considerations can be incredibly important to the client. For many, this will be the first time they've thought about the future in this way.
  • Be the quarterback. Start preparing your attorney referral partners with the idea that you will "quarterback" the relationship. Can you schedule an initial meeting with all parties so that the client doesn't need to make trips to multiple offices? Would the client prefer to talk via conference call or Skype? Saving time can be a big motivator for busy young professionals. Also, prepare the client for what to expect in terms of the process and potential costs. Millennials are adept at online shopping and price comparison—helping them understand their purchase will go a long way.
  • Help interpret the attorney's recommendations. For singles or couples without children, an estate plan will likely focus on three areas: financial powers of attorney, health care powers of attorney, and wills. Millennials are known as information gatherers, and it will be important for them to have a sound grasp of their estate planning. As their families or finances grow, introduce more complex trust planning, and a review of asset ownership and beneficiary designations can round out their planning.
  • Don't forget digital assets. Younger clients probably haven't considered what will become of their digital information after they're gone. They likely have online profiles for their investment, savings, and retirement accounts; consumer credit cards; and a variety of other financial and nonfinancial activities. Help your client catalog and plan for the disposition of these digital assets. Who will have access and passwords? Who will get ownership of assets with value?

Insurance can help safeguard a bright future. For millennials, insurance coverage likely takes the form of basic motor vehicle and renters or homeowners policies. It can be difficult for young people to consider the possibility of a devastating hit to their lives or their finances. Again, the focus should be on the future—especially for clients who are too young to withstand such an impact without protection. Can you help your millennial clients carve out funds to pay for these various coverage needs?

  • Liability coverage. Surprisingly, umbrella coverage often isn't a part of a young person's insurance portfolio. An inexpensive umbrella policy can go a long way toward protecting the client and his or her car, home, and other assets against liability claims. Remember, younger clients may not have significant wealth, but they do have a future to protect. If a claim is raised, they'll need assets for legal fees. And, if compensation is awarded, a lack of assets doesn't mean the client won't be obligated to satisfy the judgment. Is the client willing to risk his or her future income potential?
  • Disability coverage. Younger professionals frequently think of insuring possessions, but they may not realize that their health and ability to work could be their greatest assets. For young professionals with sizable incomes, disability coverage can provide income replacement for their families. If they're single, it may help them avoid having to return home to live with their parents in the event they become disabled. For entrepreneurial types, it may help keep a new business afloat during tough times.
  • Life insurance. Millennials may need your help understanding their employer-provided benefits and determining whether the level of coverage is sufficient. If employer-provided insurance isn't available, can they tolerate the costs of a term policy? Explain the benefits such a policy offers in the event of an unexpected death. Do they realize that while federal student loans are forgiven, private loans will become debts of their estate? Would they want family members who cosigned a mortgage to be left with the bill? Is college funding for a child a concern?
  • Health insurance. Last but not least, young clients should evaluate their health coverage. It may surprise them to learn that medical expenses are a major cause of bankruptcy cases.

What's the Charge?

As you consider the potential financial planning needs in working with millennials, you may also want to consider charging for financial planning services, if you are appropriately registered to do so and it's approved by your firm. You might charge an hourly, one-time, recurring, or flat fee for any financial projects completed for a client—design your own fee structure to fit the client's needs. Some areas of planning may include:

  • Budgeting and cash flow analysis
  • Investment tax analysis
  • Education planning
  • Estate planning

There's no doubt about it: whether or not you adopt a new fee structure, building relationships with millennial clients is likely to require some adjustments on your part. But reaching out to these prospects before other advisors begin competing for their business is almost certainly a wise investment.

Have you identified other areas that need to be addressed for your younger clients? Have you adopted a new fee structure? Please share your thoughts with us below.

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Topics: Financial Planning

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