Advisors need to get hesitant younger investors thinking small in order to ease their fears about the market, according to Jim Vlahos, senior vice president, division sales manager for Canada, Franklin Templeton Investments Corp. in Toronto.
A recent survey completed by UBS Wealth Management Americas found that millennials are the most conservative generation since the Great Depression when it comes to investments. (See Investment Executive, Millennial investors scarred by financial crisis, January 27, 2013.)
Vlahos finds that statistic unsurprising given the investment losses that many of the parents of millennials sustained during the financial crisis in 2008.
“They heard their parents talk about the amount of money that they’d lost,” says Vlahos, “and, if they did sell at the time, how [their parents] didn’t have enough money left for education or trips.”
In addition to fears of market volatility, many potential millennial investors don’t believe they have enough money to invest, says Vlahos. Furthermore, for many millennials, typical investment goals, such as retirement, seem too far off to consider seriously.
To help ease these younger investors into the idea of regularly saving and investing their wealth, Vlavos suggests talking about coffee. Have clients consider how much they could save by simply forgoing a daily trip to the coffee shop and investing that money instead, says Vlahos.
Says Vlahos: “It’s discipline, it’s habit – just like buying that two-dollar coffee.”
Furthermore, by breaking their savings to an amount that’s easily spent on something like a coffee takes some of the fear out of the conversation, says Vlahos, because two dollars isn’t seen as a great risk.
As well, advisors should make use of technology to educate this demographic about investments, says Vlahos, and to help them feel comfortable investing in products other than a money market fund or guaranteed investment certificates (GIC). “Millennial investors are hungry for information, ” he says, “and want to be engaged in the decision-making process.”
Making use of social media platforms, such as LinkedIn and YouTube, he says, is an easy way to provide this technologically savvy generation with instant information.
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Correction: An earlier version of this story included an incorrect example on the possible returns of saving two dollars per day. We apologize for any inconvenience.