Many young adults are concerned about their personal finances. For example, a new Country Financial poll revealed that 59 percent of Millennials rated their overall level of financial security as just “fair” or “poor, while only 37 percent reported feeling “excellent” or “good” about their current money situation. What is worse is that nearly half of Gen Y respondents (48 percent) said that they are not able to regularly set aside any money for savings or investments, and 29 percent were not confident about their ability to pay their debts on time.
Such issues are likely being exacerbated by the fact that more and more Millennials are starting to reach the age at which their financial responsibilities begin to rapidly increase, e.g. having children and purchasing a home. Altogether it should not be too surprising that a new Cerulli Associates study found that a growing number of young adults are willing to pay for professional financial help. Specifically, 79 percent of surveyed Americans between the ages of 30 and 39 said that they would be open to paying for advice, and 73 percent of respondents under the age of 30 reported the same. Both of those figures are marked increases from earlier surveys and well above the level of eagerness to pay for financial expertise reported by older generations.
A key benefit of Millennials’ growing willingness to work with an advisor is that doing so can help many of these young adults stay invested in the market during periods of heightened volatility. For example, a Gallup survey found that investors who consulted with a financial advisor during the sharp market selloff in the summer of 2015 were more than twice as likely to have purchased stocks at a discount than those who did not seek professional advice. This greater commitment to the market could be especially useful now with stocks having essentially gone straight up since the Presidential election without any meaningful pullback. Indeed, the rally could still continue even with major indices at record levels but several experienced market participants have grown concerned that some sort of broad profit taking will occur in the near-future.
Of course predicting where stocks will head over a short time horizon is extremely difficult, if not impossible. For retirement investors, though, with relatively long time horizons, the main thing to understand is that market corrections are far from uncommon. In fact, the benchmark S&P 500 index since 1980 has experienced an average intra-year drawdown of 14.2 percent but still managed to finish the year positive 76 percent of the time. Moreover, broad selloffs can be quite scary while they are occurring but the market has a history of recovering from even the most violent corrections. This does not mean that one should always be fully invested in equities but rather that it is likely a good idea to not panic if you turn on the television one morning and see that major indices are down sharply. The best way to avoid such emotional, knee-jerk trading is to always consult with your advisor before making any major investment decisions.
Sources: Country Financial, Cerulli Associates, NAPA, CNBC, Gallup, Think Advisor, Bloomberg, J.P. Morgan
Post author: Charles CouchDisclosures