Despite their young age, Generation Y are already investing and looking for trusted advice about their finances, according to the TD Investor Insights Index released on Monday.
“[Generation Y is] investing almost a fifth of their income at this point and they’re even telling us [TD] that in an ideal world that they would want to bump that up to about 30% of their income,” says Cynthia Caskey, vice president and portfolio manager, TD Wealth Private Investment Advice in Toronto. “And this is despite all of the challenges we can think about such as trying to pay off student loans [or] trying to get into the housing market.”
The average Gen Y investor made his or her first investment at age 20, according to the index, compared to the average age of 27 for their Baby Boomer parents. In part, family members drive this generation’s early interest in the financial markets. According to the study, 41% of Gen Y investors say they started to invest because of family encouragement.
Advisors can make the most of this family connection by adopting a multi-generational approach to financial planning and investing, suggests Caskey. For example, advisors can talk to clients about their long-term goals including the legacy they wish to leave to their children, which in turn is an opportunity to meet with the younger generation and to help them with their financial goals.
As well, many of these younger investors may be looking for such an introduction with 35% of survey respondents saying knowing where to find trustworthy advice is a challenge. However, that doesn’t mean Gen Y investors will wait around to find the right advisor as 48% of respondents manage their portfolios online.
The top priorities for investing for Gen Y is retirement, 50%, and saving to buy a home, 44%, according to TD. Travel came in third at 43% followed by financial independence at 42%.
In working with this generation to reach those goals, Caskey says advisors should set up a regular contribution schedule and put things in terms Gen Y investors can understand. For instance, ask these younger clients what they spend a week on coffee and put that in perspective of a regular savings and investment plan.