Financial Advice for Millennials

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Financial advice can be hard to come by if you go it alone. Source: Dave Dugale via Wikimedia Commons.

While much has been made of the coming retirement crunch for Baby Boomers, another generation is doing a fantastic job getting a leg up on saving for the future. A whopping 70% of millennials -- those born between 1979 and 1996 -- with a full-time job started socking away retirement money at the young age of 22.

So why do they need financial advice?

Because it seems that millennials are having a hard time figuring out what to do with that money once they've started saving it. If you count yourself -- or your children or grandchildren -- among this generation, then I have a few key pieces of financial advice that could go a long way toward securing financial independence.

But first, let's acknowledge a job well done
Two separate studies, one conducted by Fidelity and one by TransAmerica, have painted an exceedingly hopeful picture of the future for millennials. Among young people who have access to a workplace retirement program, 70% are opting in. And the majority aren't stopping there: 56% reported having started to save for retirement outside of work as well.

When compared with Baby Boomers, who didn't start saving for retirement until an average age of 35, you can see why millennials are setting themselves up for financial success.

Sage financial advice: don't forget stocks
The first issue worth addressing with millennials is where that money is going. Much like those who grew up during the Great Depression, many of today's young professionals, having lived through the Great Recession, see the stock market as a big casino.

Broken down by asset class, this is where their retirement savings are going, as compared to their older counterparts.

What's astounding about this is that millennials have more money in bonds or other conservative investments than any other generation, including today's Baby Boomers. In fact, if we assume that half of the cash invested in the stock/bond mix is in stocks, millennials have the least amount of money in the stock market altogether.

When you consider that never, in all of modern history, has any other instrument been so effective at building wealth and securing Americans' financial independence as the stock market, you can see how crazy this is.

Distrust: the root of the problem
Beyond the fact that many of today's young professionals were just entering the workforce when the stock market crashed, there are other reasons for this tepid approach to investing. Most importantly, millennials aren't quite sure where to turn for financial advice.

When asked by Fidelity whom they trust the most for financial advice, 33% of millennials said their parents. Intuitively, this makes sense; we can, it is hoped, rest assured that our parents have your best interests in mind. But 49% said they don't get any financial advice from their parents, and 23% said they trusted no one!

Add that all up, and you have a generation that is understandably wary of stocks. If half of today's young adults don't get any advice from their parents, and one-quarter don't trust anyone, we can only hope that some serious self-education is taking place.

If that's the case, then maybe I'm writing this article for nothing. But assuming it's not -- assuming that many millennials are currently flying by the seat of their pants -- then let me offer one crucial piece of financial advice: find a financial planner you can trust.

Finding a financial planner
There are thousands of financial planners out there for you to choose from. In order to help you weed out the ones who might just see you as their next paycheck, rather than a partner in the planning process, there are a few key things to look for.

For starters, it'll be important to find a planner who has taken a fiduciary oath to protect your best interests. Without fiduciary duty, your financial advisor could recommend products that are better for their commission than for your bottom line.

Hand in hand with finding a fiduciary, it is generally safer to find an advisor who charges a flat fee as opposed to a commission or a percentage of your wealth that is under his/her discretion. Again, the idea here is that by charging a flat fee, your advisor has no financial incentive to steer you toward products that are better for them, and not for you.

After this, it's important to research this planner's background and experience. In the end, your overall comfort with your advisor will be the most important factor in making the best choice. A great place to start is the National Association of Personal Financial Advisors, where you can find an advisor in your ZIP code. All advisors registered with NAPFA are fiduciaries who provide fee-only services.

In the end, this simple financial advice could go a long way toward turning millennials' excellent saving habits into excellent investment habits.

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