One of the biggest financial market trends since the beginning of the pandemic has been the participation by millennials in the investing world. Many think that they present a unique set of circumstances for financial advisors, but is that really true? Doug Boneparth, the founder of Bone Fide Wealth, specializes in helping the millennial generation with their financial planning needs and stops by the ETF Think Tank to offer his thoughts on what advisors should be aware of.
Are millennials asking very different questions from the investor universe in general? Boneparth doesn’t feel as if their behaviors or goals are different, but understanding their needs still is. They’re still interested in the same objectives as others, such as buying a home. Going after millennials isn’t niche anymore, but relatability will be a key factor for advisors. In the end, it still comes down to finding the right plan for each person and figuring out a way to stick to it.
Boneparth also feels like the financial advisor 10-20 years from now could look different. If there’s a threat to the advice side, it likely happens on the low end of the affluence scale where there’s greater democratization of information and things, such as free access to CFPs. He sees more flat fee planning taking place and customers who are happy to manage their portfolios themselves but pay for the financial planning part. The advisors of the future need to pay particular attention to how much they charge clients, especially if they consider moving to a one price for all model.
The current environment can be challenging because millennials only know a market where stocks are going up. One of the advantages for this group is that they’re gaining exposure and experience much earlier than other generations. On the other hand, there’s some reckless risk taking going on. Alternatives can be a nice way to diversify a portfolio and manage risk, but the idea of portfolio construction is a little skewed. Boneparth says he’s not thrilled with the way that these folks are learning about money management first through investing instead of traditional cash management, but at least they are on their way.
Another challenge is how to approach clients who have 50% of their portfolios or more invested in cryptocurrency, which could be possible if they got in early. Boneparth acknowledges that the struggle is real when it comes to planners giving advice on crypto, something his firm doesn’t do for both regulatory and operational reasons. Regulators may not be providing guidance and there’s a lot of uncertainty, so that’s why it’ll be so important to educate before you allocate. If you can contextualize the data, such as volatility or correlation to traditional asset classes, you can do a great deal of good for clients.
Some other key takeaways:
- Traditional valuation metrics may not be taking into account how the new disruptive economy has evolved. The greatest disconnect is understanding how to value traditional sectors in today’s environment.
- One of the biggest opportunities in defi is tax reporting. There are billions of dollars to be made in developing effective tax reporting. Tell clients to make sure they’re accounting and documenting appropriately because it will be costly and time consuming if the IRS asks questions.
- NFTs are the first expressive version of defi. People today view it as a lot of fun, but flipping digital assets is only the surface level. Boneparth wants to see businesses use it to develop brands and raise funds. Once you figure out how it can impact businesses, then you get a better idea of their potential.
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