COLLEGE SAVINGS 101

Savingforcollege.com

A 529 client you don't want to overlook
http://www.savingforcollege.com/articles/a-529-client-you-don-t-want-to-overlook-794

Posted: 2015-06-19

by Matthew Toner

Senior Analyst, Savingforcollege.com.

Financial Professional Content

Have you been giving millennials enough attention? While the Baby Boomers are often thought of as the countryís largest generation, millennials actually make up a greater share of the population today (28.7% versus 23.7%). Whatís more, there is a projected $30 trillion transfer of wealth coming from Baby Boomers to this younger generation. Sounds like a great opportunity for advisors, right?

But if you want to add millennials to your client base, you need to tread lightly. This group simply doesnít operate like previous generations. After witnessing the 2008 financial crisis and having seen their parents lose vast sums of their retirement wealth, they are skeptics of the financial services industry to say the least. In fact, According to a Pew Research study from 2014, millennials are about half as likely to trust people as Baby Boomers. As a result, they tend to shy away from many financial products traditionally offered through advisors.

However they do seem to have a keen interest in saving for their childrenís college education. Perhaps this is because they are struggling with the burden of their own student loan debt, which for the class of 2014 was an average of $33,000 per student. In any case, this presents an opportunity for you, as an advisor, to help develop a strategy for younger clients to pay off their debt and also explore the benefits of tax-advantaged 529 college savings plans. In fact, nearly 20% of parents who are looking to open a 529 plan are between 25 and 34 years old.

5 reasons college graduates are becoming the Boomerang Generation

Here are a few key tips on how you can tailor your approach when working with millennials:

1) Be straightforward. Over 23% of millennials have earned a bachelorís degree or higher, making them the most educated generation in history. You can expect everything in your conversations to be researched and scrutinized, so always be direct and truthful when discussing any financial product or plan. When discussing 529 plans, simply list out the pros and the cons. Overhyping them as an investment will only hurt your credibility.

2) Provide options. Millennials are independent thinkers who do not appreciate being told what to do. When presenting a college savings strategy, be sure to provide multiple options that include different plans, contribution amounts and investments and outline the pros and cons of each. Allow the client to review the different scenarios and involve them in the decision making process.

3) Educate. Millennial clients will also want to know why each plan option is being presented. Remember, they will do their own research so if they donít understand why youíve selected certain 529 plans it can lead to confusion. Whatís more, discussing the reasoning behind your selections might reveal valuable information about your clientís investment preferences. For example, when you explain why you chose a foreign equity fund for their 529 portfolio, you may find out that they are more interested in socially responsible investments. Having this discussion will allow you to create specially catered advice, which is of utter importance to a generation that demands mass customization.

4) Cross-sell. Demonstrating your expertise and gaining the trust of this skeptical generation will give you access into other areas of their financial lives, which many are handling on their own. For example, becoming a parent is a life-altering event, which opens the door to cross-sell products such as life insurance. Not only is the millennial generation incredibly underinsured, they are twice as likely to buy insurance online instead of through an agent. In fact, a study was conducted by public relations agency Edelman gauging how the public views the trustworthiness of major industrial sectors. What topped the list? Technology. Dead last? Financial Services.

How to pay off student loan debt while saving for the future

Senior Analyst, Savingforcollege.com.

Financial Professional Content

Have you been giving millennials enough attention? While the Baby Boomers are often thought of as the countryís largest generation, millennials actually make up a greater share of the population today (28.7% versus 23.7%). Whatís more, there is a projected $30 trillion transfer of wealth coming from Baby Boomers to this younger generation. Sounds like a great opportunity for advisors, right?

But if you want to add millennials to your client base, you need to tread lightly. This group simply doesnít operate like previous generations. After witnessing the 2008 financial crisis and having seen their parents lose vast sums of their retirement wealth, they are skeptics of the financial services industry to say the least. In fact, According to a Pew Research study from 2014, millennials are about half as likely to trust people as Baby Boomers. As a result, they tend to shy away from many financial products traditionally offered through advisors.

However they do seem to have a keen interest in saving for their childrenís college education. Perhaps this is because they are struggling with the burden of their own student loan debt, which for the class of 2014 was an average of $33,000 per student. In any case, this presents an opportunity for you, as an advisor, to help develop a strategy for younger clients to pay off their debt and also explore the benefits of tax-advantaged 529 college savings plans. In fact, nearly 20% of parents who are looking to open a 529 plan are between 25 and 34 years old.

5 reasons college graduates are becoming the Boomerang Generation

Here are a few key tips on how you can tailor your approach when working with millennials:

1) Be straightforward. Over 23% of millennials have earned a bachelorís degree or higher, making them the most educated generation in history. You can expect everything in your conversations to be researched and scrutinized, so always be direct and truthful when discussing any financial product or plan. When discussing 529 plans, simply list out the pros and the cons. Overhyping them as an investment will only hurt your credibility.

2) Provide options. Millennials are independent thinkers who do not appreciate being told what to do. When presenting a college savings strategy, be sure to provide multiple options that include different plans, contribution amounts and investments and outline the pros and cons of each. Allow the client to review the different scenarios and involve them in the decision making process.

3) Educate. Millennial clients will also want to know why each plan option is being presented. Remember, they will do their own research so if they donít understand why youíve selected certain 529 plans it can lead to confusion. Whatís more, discussing the reasoning behind your selections might reveal valuable information about your clientís investment preferences. For example, when you explain why you chose a foreign equity fund for their 529 portfolio, you may find out that they are more interested in socially responsible investments. Having this discussion will allow you to create specially catered advice, which is of utter importance to a generation that demands mass customization.

4) Cross-sell. Demonstrating your expertise and gaining the trust of this skeptical generation will give you access into other areas of their financial lives, which many are handling on their own. For example, becoming a parent is a life-altering event, which opens the door to cross-sell products such as life insurance. Not only is the millennial generation incredibly underinsured, they are twice as likely to buy insurance online instead of through an agent. In fact, a study was conducted by public relations agency Edelman gauging how the public views the trustworthiness of major industrial sectors. What topped the list? Technology. Dead last? Financial Services.

How to pay off student loan debt while saving for the future

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