Why Gen Z Is Turning to Financial Advisors Sooner Than Any Other Generation

Gen Z wants many of the same things in life as earlier generations of Americans, including a house, a family, a comfortable retirement at a reasonable age. But so far the numbers aren’t adding up, so they’re seeking help from financial advisors far earlier in life than previous generations.

According to Northwestern Mutual, 28% of Gen Z turned to a financial advisor for the first time within the past year. Their main objective was to figure out how to grow and protect their wealth, followed by saving for retirement. Among all Gen Z members who have worked with an advisor, the average age at which they started doing so was 23—compared to age 30 for Millennials, age 40 for Gen X, and age 49 for Boomers.

The fact that people in their 20s are willing to pay for financial advice is likely due to a combination of earlier exposure to financial products and a more challenging economic and financial landscape, including runaway housing prices, stubborn inflation, and painful student debt.

Why Are Younger People Seeking Help From Financial Advisors?

Financial advisors don’t usually receive calls from twenty-somethings. In the past, people generally began paying professionals for financial advice when they were a decade or more older.

That began to change with Millennials and is even more evident with Gen Z. Why? Obviously, each individual case is different. However, in the main, it’s likely the following factors played a key role in convincing today’s young adults to reach out for help.

• Social media. The spread of financial content on social media has made investing and the importance of money management more visible and accessible to younger people.
• Changing fashions. Talking about money has become cool, and social media is full of influential people advocating for better management of finances.
• Economic challenges. It’s been a somewhat rough ride for Gen Z. They’ve come of age as the U.S. has experienced the highest inflation in decades and a growing housing affordability crisis, among other challenges. Against this backdrop, anxiety is almost guaranteed.

Challenges and Opportunities for Financial Advisors

That people are seeking professional financial advice at a younger age represents a great opportunity for financial advisors. These prospective clients still have many years to live, need help with every angle of their finances, and could eventually be poised to inherit large sums of money.

Still, advisors shouldn’t take for granted that loads of new business are heading their way. Research shows the majority of twenty-somethings are still more likely to get advice from friends and family, social media, banks, credit unions, and books. And those who are interested may make different demands than many in the profession are accustomed to.

Young adults can be more distrustful of traditional institutions and products and receptive to alternative asset classes, values-driven investing, leveraging technology, and bite-sized content that gets to the point. They also lead different lifestyles than previous generations. With them, the traditional milestones of getting married, buying a home, and having children are likely to be delayed, and earnings might be more volatile.

Compensation is another potential sticking point. Many advisors charge a percentage of the total assets they manage. The average person in their 20s isn’t likely to offer much in that regard, at least at the beginning, and an alternative fee structure, such as charging by the hour, might not be affordable to them.

The Bottom Line

Growing awareness of investing and greater economic uncertainty are pushing some of today’s young people to seek out financial advisors sooner than members of previous generations. This could be a win-win for all parties, provided advisors are willing to adapt to the needs of a vastly different generation and accept that they may earn less money from them in the beginning.