Millennial (GenY) Investing

Millennials are in the age group born between 1982 and 2004, also known as Gen Y.

Millennial investors will generally want to have control over their investments but will also be willing to ask for help. They are much more tech savvy then their parents and find it easy to keep the control. Millennials will have a self-directed investment account where they can buy and sell investments of their choice.

Millennials will generally choose to buy and sell what they read about on social media, which typically has them buying investments at a high price but instead of holding on to them for a long period and will generally sell them when they start to see a loss of 10 – 30%. This is the same mistake that was made by generations before them, buy on the momentum but sell when they see a loss.

The cost of investment advice in Canada is usually between 1.5% and 2.5%, but Millennials will have a hard time getting any less than 2.5% as anything less is generally given to those with over $500,000 to invest.

Millennials will tend to find themselves in situations such as:

Robo-Advisor – which gives them very little control and are only limited to Exchange Traded Funds (ETF’s) with low Management Expense Ratio (MER) Fees plus a low administration fee on top of the MER fee.

Self-Directed Investment Accounts – There is no advice offed from the institution, they have all the control over the trades and the trade fee is set at a flat rate ex: $9.99 per trade. They can by stocks, bonds, ETF’s and mutual funds.

Mutual funds at bank branches – with this option they can only buy traditional mutual funds at a fee of 1.5% to 2.5%, they will only get limited advise and have very little control over the investments and few options.

This is where an investment advisor that is willing to coach come in, are there really ways to get this? YES!

Millennials can pay for a recommended portfolio, coaching and advice at an hourly rate and pay for the portfolio management with a trade fee. This is a cost-effective way to receive true comprehensive planning.

Year 1 of your portfolio fee will be higher as more work goes into the first year with opening accounts, planning, and building a comprehensive financial plan and recommendation to implement your portfolio. So, year 2 should not have the same cost as year 1, when a review is done of your portfolio you should be charged by the hour for the advice and by trade for any buying and selling you want to do.

What this means is your fees in year 1 should be very different than the fees in the years moving forward due to the amount of work needed in the first year. Millennials should choose the billing option; Trade fee billing for investments with the hourly fee billing for advice; that allows them to have control over their fees.

If you would like to speak with a BC based comprehensive financial planning broker you can call us at 604-816-5988 or send us an email and someone will get back to you within 24 hours or you will receive a 20 page financial projection customized to your unique financial situation for free.