Clients in their 20s, who are just starting out in their working lives, have financial needs that differ materially from those of the rest of the population. To that end, advisors and brokers must be aware of what makes these clients tick and must recognize the fact that the advice and services targeted toward this younger crowd might not be rewarded with a commission.

In this article, we'll address some of the needs that young people have, and provide suggestions for how advisors/brokers can address those needs.

Immediate Liquidity Needs
Most advisors recommend that their clients sock away cash in a formal retirement plan in the early years in the hope that the accumulated savings will grow into a big nest egg when the client reaches retirement age. This is considered sound advice. However, these same advisors must also be aware that not all clients can save money in their early years. In addition, younger clients often need to maintain a certain level of liquidity so that they can purchase items such as a car, or place a down payment on a home.

SEE: Retirement Savings Tips For 18- 24-Year-Olds and Competing Priorities: Too Many Choices, Too Few Dollars

This means that sometimes the best advice that an investment professional can give, is for the client to keep his or her funds in a money market account, or some other short-term investment vehicle that won't lose value. By definition, this may also mean that the advisor or broker might not draw a commission. However, this is OK, because over the long haul, as the client accumulates assets, the honesty and thoughtfulness the advisor has shown will more often than not be rewarded through increased investment.

SEE: Get A Short-Term Advantage In The Money Market

Assessing Risk Tolerance
As registered representatives, we are taught that the younger a client is, the more aggressive we should be with their investments. Unfortunately, many advisors seem to apply this school of thought to all of their clients' portfolios without further consideration or analysis.

Despite this commonly held view, some clients aren't aggressive investors by nature. They simply don't have a high risk tolerance, even if they have a higher net worth, and can afford to lose more than their peers. Therefore, advisors need to realize that their first objective is to make sure their clients' needs and desires are being met. This may mean forgoing the strategies you have learned in school or on the job. It may also mean (by investing in less risky asset classes) drawing a smaller commission.

Providing for Aging Parents/Grandparents
Because of an aging population, and the rising cost of insurance, many young people are being forced to provide (food, clothing, shelter, healthcare) for their parents or grandparents. This means that they may need to maintain a portion of their assets in short-term notes or certificates of deposit. Alternatively, they may need or prefer to allocate a large portion of their investments to bonds in order to obtain a steady stream of income and to satisfy ongoing living arrangements for their elders.

This may lead to additional work - and less income - for the advisor. As an advisor, you must be keenly aware of clients' ever changing needs, and make adjustments to their holdings accordingly. For this reason all advisors/brokers must consistently review the financial needs of their younger clients in order to make sure that their assets are being invested in a sensible manner, as well as to determine whether any other needs must be provided for.

Insurance Needs
Younger investors typically overlook their need for insurance. They also overlook the fact that the best time to buy insurance is when they are young, when the premiums are relatively inexpensive.

SEE: How Much Life Insurance Should You Carry? and Understand Your Insurance Contract

In any case, advisors/brokers should definitely broach the subject of life and disability insurance with their younger clients, and recommend that they review their insurance needs with a licensed agent. Unfortunately, many investment professionals are reluctant to do this because it means that fewer funds will be available for investment (commissions).

That said, if these same registered reps simply obtain insurance licenses, they will be able to meet their clients' needs, which is their first duty and simultaneously be able to generate a commission. This would be a win-win scenario for all parties involved.

The Discipline Factor
As mentioned above, not all young investors are able to put away money each month for retirement. However, it is vital that advisors/brokers instill some sense of urgency in their clients and train them to save at least some portion of their monthly pay, and then to put that savings into a retirement account such as a Roth IRA.

SEE: Retirement Savings Tips For 25- To 34-Year-Olds and Boomerangs: Why Some Kids Never Leave The Nest

Far too often, advisors are focused on their larger clients, and fail to look for the $100 check their younger clients send in on a monthly basis to be added to their accounts. However, that needs to change. Advisors/brokers need to instill a sense of discipline in their clients and make certain that their clients follow through and consistently add to their savings. This can be easily achieved by recommending that they set up an automatic payment system, in which the funds are automatically added to their saving/investing accounts each month.

The Bottom Line
The assumption that all younger investors should be aggressive with their investments, or should automatically fund their retirement plans to the maximum isn't always correct. Younger clients have many needs and goals that must be properly evaluated. With that in mind, advisors must also accept that higher fees and/or commissions aren't always part of that equation.

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