March 08th, 2023

3 amazing reasons your younger clients are sleepwalking into losses, and how we can help

Financial information is at all our fingertips in the modern world, enabling anyone with access to the internet to spend, receive, invest, and save money.

While our access to financial information has never been more widespread, there are potential risks that come with the technology we use every day.

If you have millennial and Gen Z clients who are accumulating significant wealth, it could be beneficial to pay attention to how they manage their money – and crucially, where they take advice, and from who.

Indeed, if your younger clients are trying to grow their wealth while relying solely on online financial advice, they could be sleepwalking into losses.

According to a report from FTAdviser, 60% of millennials and 57% of Gen Z with financial products say they can find “good advice” online. Plus, 44% of Gen Z say they can also source “good advice” on social media.

So, here are three reasons your young clients could be on a risky path, and how introducing them to a financial planner could help them stay on course to meet their goals.

1. Young people could be accumulating wealth through multiple sources of revenue – without much idea of how to handle it

Although we usually imagine wealthy individuals to be older – as they’ve simply had more time to climb the career ladder and accumulate their assets – this is not always the case.

As you may already be aware, your young clients could be running their own businesses, working multiple jobs, and be receiving significant wealth from their parents and grandparents too.

For instance, a study by UK insurer Aviva has found that since the start of the pandemic, 1 in 5 people have started a “side-hustle”. What’s more, MoneyAge reports over-55s have gifted more than £2.1 billion to the next generations since January 2020 – meaning your younger clients could be receiving inherited wealth on top of their earnings.

All this to say: receiving wealth from multiple sources can make a person wealthy, but if your client is unaware of how to manage it, they could see unnecessary losses down the line.

Without professional guidance, your younger clients could:

  • Be inadvertently pushed into a higher tax bracket by their additional income and inheritance
  • Overspend the wealth they earn without saving for the future
  • Underpay pension contributions, which may mean they are left without enough to live on in the decades to come
  • Invest in a high-risk portfolio without being aware of the consequences.

What’s more, as the FTAdviser report suggests, if your clients do need advice, they may not turn to a financial planner of their own volition.

So, it could be wise to raise the conversation with your younger clients, and point them in the direction of a financial planner who can help create a bespoke plan based on their long-term goals.

2. Research shows under-40s are largely unaware of investment risk

Not only are many adults unaware of the value of advice, and potentially uninformed about how to manage their income, research shows under-40s could be making risky, uninformed financial choices.

Indeed, a study by the Financial Conduct Authority (FCA) suggests social media advice can not only be misleading, but it can also stoke up risk-taking behaviours, particularly in under-40s. The research found that 4 in 10 people do not consider “losing some money” a risk of investing, and 78% say there are some industries they think are a “safe bet”.

Of course, any qualified financial planner would tell your client that there is almost always the risk of losing the wealth they put in, and that working out their capacity for loss and attitude to risk is the first step of becoming a seasoned investor.

3. The online financial landscape has seen an uptick in fraud and scams

Finally, for people of any age, the online financial landscape has unfortunately seen a rise in criminal activity in recent years.

For example, a report from MoneyAge reveals the FCA blocked 8,500 misleading ads in 2022 alone – 14 times the number they blocked in 2021.

Shockingly, a report from Social Media Today shows 62% of Facebook users encounter scams every single week on the app. Plus, This Is Money reports Instagram impersonation scams increased by 155% in the year to April 2022.

While anyone can be affected by scams and fraud, your young clients may be more engaged with social media and other online platforms than your older ones. Having a strong financial plan in place can help them steer clear of scams on social media.

Here at Prosser Knowles, we can help your young clients:

  • Visualise their long-term life goals
  • Work out a flexible financial plan
  • Set up protection that can shield their wealth from unexpected events
  • Feel confident about saving, investing, and earning money
  • Review their tax situation and improve its efficiency where possible.

We believe there is no such thing as being “too young” to receive great financial advice.

Get in touch

Do you have young clients in need of serious financial guidance? Get in touch today. Email or call 01905 619 100.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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