For Millennials goal is financial freedom

Rachel Lake had worked with financial planners before, but the relationship didn't click until the Millennial began working with an adviser who focuses his message, and methods, on her generation.

"It's more like a partnership,'' said Lake, 32, who is a home loan specialist living in Boston. "You want your personal trainer, your CPA and you want your financial adviser but I want somebody to be there more as a coach than as someone telling me what I should be doing. Because I don't feel like I'm on a traditional path, and I don't think I'm alone in that. ... (Millennials) want someone that sees us as individuals rather than as a stereotypically corporate worker.''

When it comes to mapping out financial futures, some financial planners are finding that Millennials prefer to work with those who understand their generation.

They are a group that is likely to have several jobs over the course of a lifetime, may decide to rent rather than own, and is used to being able to get answers with the click of a button.

Many in that generation, born in the early 1980s, may also be burdened with a staggering amount of student debt, and have had difficulty finding a job or boosting their salaries during and after the Great Recession. All those factors mean that the financial strategies that worked for their Boomer or Gen X parents, may not work for them.

Eric Roberge, who started a financial-planning firm that targets Millennials and counts Lake as a client, says that traditionally, financial firms have emphasized the management of assets. But the average Millennial, just starting to ascend the corporate ladder, won't have many.

"If you're a wealthy person, you talk about estate planning and taxes and growth in investments,'' says Roberge who at age 35 is on the cusp of the generation he serves. "Someone younger, those things aren't even in their wheelhouse yet. … But (they) have many concerns about their finances because they never learned about these things in school, like goal setting and investment management.''

To appeal to Millennials, Roberge bills himself as a "personal trainer'' guiding clients to financial health, and money as a tool to live a life fueled by enjoyment and passion.

"The old brick and mortar office with the guy in the suit, Millennials are not interested in that,'' he says, adding that if his introduction to a prospective clients starts with the title personal finance planner, "Their eyes glaze over. They already have their idea about what I do, and they don't want any part of it. When I lead with 'I help professionals in their 20s and 30s use money as a tool to live a life they love,' they open up.''

Financial planner Joe Pitzl, 34, says Millennials like himself have a different way of absorbing information than their parents and grandparents, and as a result planners in that age group take a more collaborative approach.

"We were taught you need to work in teams, explore, and to try pushing the button and seeing what it does,'' says Pitzl, who works in the Minneapolis-St. Paul area. "The Millennial generation tends to want to arrive at our own conclusions. So instead of definitively saying, 'You should do xyz,' you have to ... ask them the right sequence of questions for them to solve the problem themselves.''

For a young professional, financial freedom to do what they want in the near future, such as continuing their education or traveling, may be more of a priority than socking away money in order to retire in 30 years.

So investing every spare dime in a 401(k) — financial dogma for many Americans — may not be the best idea for Generation Y.

"I give them the freedom to choose and tell them it's OK even though society says you have to pour everything into your 401(k) to retire,'' Roberge says. "There are other ways to get there. Living the life that they love may mean following a way that society doesn't say you should go.''

Buying a home is also not always desirable to younger clients who may prefer urban living, or need to relocate in pursuit of their professional goals.

"I'm seeing a lot of conflict around (homeownership) with Millennials and Gen X,'' says Pitzl. "Homeownership isn't just about mortgage vs. rent. You have furnaces and roofs that have to be replaced, along with utilities and taxes, and when you add all of those things up, the finances don't always make a compelling argument for homeownership ... especially with this Millennial demographic. They are very receptive to renting for a longer period of time.''

Lake, who is building a real estate portfolio with the goal of leaving Corporate America behind within the next decade, owns two properties, but is currently renting.

"We looked at the whole picture and decided this was a good move,'' she says. "I'm walking away from some tax advantages by not owning the place I live in now, but I'm able to put more every month into my investment account for the next property that I purchase .''

Lake, following Roberge's guidance, contributes to her 401(k), but only up to the amount that is matched by her employer. And in addition to her emergency reserve, she now has a special account designated to finance her love of travel.

"We set up a travel account that I put a set amount into every month, and it allows me to enjoy travel without pulling money out of a savings account,'' she says. Roberge "told me in our first meeting that financial advisers will set you up to live the life you want at 60, but traveling at 30 is very different from traveling at 60.''

For Roberge, catering to a Millennial clientele dictates everything from how he communicates to the way he accepts payments.

For instance, financial planners have traditionally been paid by clients in various ways. Some may charge a flat fee to create a financial plan. Others might charge a percentage, say 1% or more, based on assets they manage, or receive a commission based on the sale of a product like life insurance or an annuity.

But Roberge's clients pay him an "engagement fee'' up front that ranges from $750 to $1,500 depending on the time and complexity entailed in mapping out their financial strategy. Then, separately, clients make monthly payments that mirror how they might dole out for a subscription or to pay their light bill.

"They're used to paying gym membership fees and utilities,'' he says of his payments, which range from $125 to $200 a month. "So this is another service I'm providing that they can fit into their'' payment schedule.

He also often uses social media to speak to his digitally fluent clients, using Skype and Google Hangout to regularly communicate with clients, and offering tips and information through Twitter, LinkedIn and Facebook, as well as the relatively more old-fashioned email.

But both he and Pitzl say that ultimately, Millennials want the same thing as their older peers — a financial planner who understands what they want, and where they're coming from.

"By and large they still want to have a personality that goes along with some of the texts and emails,'' says Pitzl. "I read a lot that the relationships can be depersonalized when it comes to Millennials, but I don't agree with that at all.''