Most advisors are most interested in working with individuals who have the most money to manage. This usually means those who are about to retire or have just done so.
But many of these clients have one thing on their minds that may be even more important and worrisome to them than their money: their fully-grown (if not yet fully-matured) children.
Helping the next generation get off on the right financial foot could be the most valuable service you provide.
Win, Win, and Win
It won't be difficult to persuade the parents to let you talk to their kids. Solid money advice might be easier to take from an outsider like you than a mom or dad, and may make it less likely the kids remain (or become) a financial burden to the parents.
The younger folks get to take advantage of your expertise, despite having neither the income nor the assets necessary to otherwise qualify for an audience with you.
Finally, developing a positive relationship with the younger members of your clients' families could ensure that your oversight of their assets continues long after the older clients pass away.
Some Ground Rules
Inserting yourself between generations of even the most harmonious families can make matters worse if not handled with delicacy, diplomacy, and discretion.
You should start with the parents, perhaps by giving them a few extra business cards and suggesting that they forward your contact information to their adult children or grandchildren.
Make it clear to the current clients that none of their financial information will be discussed with the younger family members. But also pledge that anything you cover with the younger generation will be kept confidential from all others.
You can let these privacy shields loosen a bit during “family money meetings,” which you should not only suggest but also organize and facilitate if asked.
Once you get a chance to talk to the young adults, you should reiterate that what they tell you will remain private (although certain circumstances might compel you to suggest the kids talk to their folks).
Where Are They (and Their Money) Going?
After the formalities are out of the way, it's time to get down to business. Ask the twenty-something where she wants to be in the next few years, and how she plans to fund those near-term plans.
Encourage her to track her current monthly expenses, and calculate how those might be affected by any life changes, such as returning to school or moving to a new city.
Ask if she has enough savings set aside to cover a few months (or years) without a steady income, and suggest she establish a rainy day fund before spending any extra money on trivial pursuits.
Bad Credit = Financial Headwind
Whether the young adult is still going to school or has just entered the workforce, it's likely he will be attempting to borrow money at some point in the near future.
You can increase his chances of landing the best lending terms by encouraging him to check his raw credit data for free at www.annualcreditreport.com, and getting his FICO score for a small fee at www.myfico.com.
Even if he doesn't see any need to borrow any money in the near term, you can point out that his credit rating can affect his ability to rent an apartment, his insurance costs, and even his employment prospects.
Repayment at the Right Pace
On the other hand, financially-savvy young adults are often too quick to want to get out of debt, especially when it comes to paying off student loans.
Eliminating education debt is a great idea, unless it leaves the borrower with no cash to cover other emergencies, or living expenses between jobs.
So instead of rapidly paying down college loans that have lower rates and longer repayment schedules, advise the kid to focus first on funding the aforementioned emergency savings account.
After six to twelve months' worth of living expenses are built up, then any extra income can be redirected toward accelerating the debt repayment.
Wading Through HR Forms
Gainfully-employed young adults don't have to worry as much about money as their unemployed cohorts, but they have another concern with which you can help: making the most of their employers' benefit package.
Start with the kid's 401(k) plan, demonstrating the tax savings (and potential employer matching contributions) that are available on the worker's deferrals.
If that doesn't motivate her to start saving right away, show her that setting aside just $10 per day from age 22 on at 7 percent hypothetical annual return will make her a millionaire at age 65.
You can tell her the truth about her reaching that age much more quickly than she can imagine, but a long rant about how little her million will actually buy at that time will tend to diminish her enthusiasm for investing.
Even clients' children who have long been independent can benefit from your words of wisdom.
You could offer newly-engaged couples the chance to have a money meeting with you, and help them establish mutually-desired long-term financial goals and short-term spending and saving amounts.
Most new moms and dads lack the proper estate planning documents to protect themselves and their families, so sending the young parents to a qualified attorney would be an act appreciated by your older clients, as well.
Along those lines, you should encourage the younger generation to not only purchase life insurance, but with a benefit amount that's large enough to prevent a tragedy from turning the kids and grandkids into a financial responsibility of the older generation.
Even your best advice and your clients' best efforts can't prevent the next generation from making bad life and money choices, or experiencing a stretch of bad luck.
So next we'll cover the ways you can help your clients decide when and how to help the younger generation, and when it's best for everyone involved to let the kids discover what it really means to be on their own.
Kevin McKinley CFP is principal/owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of the book Make Your Kid A Millionaire (Simon & Schuster), and provides speaking and consulting services on family financial planning topics. Find out more at www.mckinleymoney.com.