By Lynn Brackpool Giles

Millennials are now the largest generation in the U.S., and they are fast becoming one of the most important.[1]

Defined as individuals between the ages of 18 and 34 as of 2015, they have much different financial priorities than previous generations — which has advisors on alert.

Sabrina Lowell, CFP, is an advisor and COO at Bay Area-based Mosaic Financial Partners who has adapted her counsel as she’s watched this group develop.

“Millennials are motivated clients,” she said. “They know they are responsible for their savings because they won’t have pensions and are wary of whether Social Security will be around when they retire.”

Lowell said that regular clients want retirement strategies, whereas millennials want to know that they are saving enough to get them where they want to go.

“They are very tech-savvy, educated, and are information gatherers,” she observed. “They’ve done their research and focus on optimizing their savings and investments while keeping expenses down.”

How they were brought up has affected this mindset, as well.

“Millennials don’t have Depression-era parents, so they didn’t see them hoard money like the baby boomers saw,” she continued. “Millennials are children of the abundance generation that prioritized finding a career that they love and [figured] the money will follow. It was more about spending versus savings, and that approach is about to be borne out as these parents have to work longer and their retirement savings are getting squeezed.”

Some experts also point out that millennials’ lifestyle habits match the “save-as-much-as-possible” mentality:[2]

They are entering the workforce with high student loan balances and are looking for ways to pay them off quickly.

They are likely to delay major life decisions like marriage and parenthood until they consider themselves financially stable.

They will take on roommates to cut down on living expenses and opt for services like Uber instead of buying a car.

Technology is integral to managing their lives.

“Technology is a large part of their world,” said Lowell. “Most of our millennial and Gen X clients use apps like MINT to help manage their finances. These tools take the choice points out of spending and savings. They can set up a framework and then use technology to run the plan, complete with limits on expenses, etcetera.”

The embrace of technology spills over into 401(k) planning. The vast majority of millennials support auto-enrollment; one study found that, “of the millennials who were auto-enrolled in their employers’ 401(k) plans, 47 percent wish their employers had enrolled them at a higher contribution rate.”[3]

Lowell suggested that this makes an advisor even more important.

“An advisor needs to be the thought partner and provide the human touch element to the planning process,” she said. “We need to help them adjust the ‘guardrails’ they have put in place, like auto-draw and auto-escalation. Advisors set the strategic overview, and then technology can take over the ongoing implementation and monitoring, including automated reminders that can save time.”

Additionally, advisors must recognize that millennials have the income, but not yet the assets.

“These are the HENRYs, or ‘high earners not rich yet’,” she said. “It’s more challenging for them to find advisors because they have sizable salaries and equity compensation, but not the accumulation of assets. But they are very loyal clients once you get them.”

She also addresses the disconnect apparent in one study that found 36 percent of millennials said they plan to spend less in 2016, and yet 88 percent said they intend to save more.[4]

“This is a behavioral issue, and it comes down to how an advisor frames the conversation,” Lowell said. She likened it to saying that 88 percent of people want to get more fit, but the same amount don’t want to diet.

‘Millennials want to save more but need help on how to do it,” she said. “The 88 percent figure points to a strong awareness. But spending less is not as appealing as saving more. Advisors should structure it as a ‘build my wealth’ program – not a ‘spend less’ approach.”

Lowell is one of many who think millennials will influence the financial services industry, and 401(k)s in particular.

“Companies are moving toward mandatory 401(k) auto enrollment, which millennials support,” Lowell said. “We will continue to see more and more participants coming into a retirement plan, and it will be commonplace, just like Social Security and Medicare have been.

“Advisors need to recognize that millennials have a real awareness of savings, and seize opportunities to provide education on other aspects, such as managing credit, optimizing their banking and credit card relationships, looking into renters’ insurance and ensuring they have adequate umbrella liability coverage,” she added.

And while older generations need a lot of hand-holding when it comes to implementation, Lowell said that millennials are generally knowledgeable about online money management and very talented at getting things done. But they still want that check-in from an advisor.

“Millennials want to know [their] investing is being taken care of and the top things they need to be doing financially,” Lowell said. “An advisor needs to know how to form these new kinds of relationships with millennial clients.”

[1] http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/

[2] http://money.usnews.com/money/blogs/my-money/articles/2016-04-14/how-millennials-are-changing-the-way-we-save

[3] http://www.prnewswire.com/news-releases/t-rowe-price-millennial-401k-savers-have-better-financial-habits-than-baby-boomers-300102502.html

[4] https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Merrill_Edge_Report_Fall_2015.pdf