A Message to Younger Investors
Over $100 trillion in wealth will transfer from Baby Boomers to Millennials by 2048. That’s the estimate from Cerulli Associates.
This shift will redefine how Millennials build and manage wealth, and it also presents an enormous opportunity for financial advisors to provide real value. But here’s the problem: I’m not sure Millennials will want it.
For over a decade, my generation - I am a self-loathing Millennial, after all - has been bombarded by ads from do-it-yourself (DIY) brokerages telling us we’re better off on our own. That we can easily manage our family’s net worth without the help of a trusted professional. And that since investing is practically free, you shouldn’t bother paying an advisor to help you. Just buy the S&P 500 or XEQT, never sell, and live happily ever after.
If only it were that simple.Let’s get a few important things out of the way.
- Investment management is just one small part of financial planning. Owning and continuing to buy the S&P 500 or XEQT is not a financial plan.
- Millennials haven’t experienced a real market downturn yet. The Covid crash lasted a few weeks, and 2022 lasted twelve months. That’s not the kind of pain that truly tests an investor.
- Investors are, and always will be, their own worst enemies.
Let me share two stories regarding the second and third points. I’ll come back to the first point at the end.
The S&P 500 dropped just shy of 20% between September 20 and December 24, 2018. I’ll never forget that Christmas Eve. I spent two hours on the phone with a young, high-income-earning couple, begging me to ‘sell everything to prevent further losses.
Back then I didn’t communicate as well as I do now, but my guidance was standard: don’t react. This correction, like every single one before it, will pass.
Unfortunately, they weren’t having it. By the end of the call, they told me to move half of their investments into cash. They weren’t happy with our agreement, and neither was I, and for completely opposite reasons.
The worst part? They never reinvested that half of their portfolio that was now sitting in cash - not even during the six-week pandemic crash of 2020, when they could have bought back in at an even lower price. I begged them to reinvest on many occasions, but they never did. By 2021, they were furious - half their portfolio sat in money market funds while the S&P 500 went on a tear, up nearly 30%.
They took their business elsewhere later that year.
Fast forward to 2022, the market took it on the chin, dropping about 25% from its highs. A client who had inherited a million dollars that summer didn’t want to invest it. He was worried, scared even, about watching that money potentially shrink.
For context, he didn’t need this money anytime soon. He was in his mid-30s, had a well-paying job, and this was a retirement asset. Retirement was at least twenty-five years away, but all he could see was the risk of losing money now.
I called him every day for two weeks, reminding him that the end of the world only happens once, and that he should be thrilled to invest when the market is low, not high. He told me every day that ‘we should wait.’
On day 15, after my pleading for twenty minutes, he reluctantly agreed to invest it all. Today that investment could be worth close to $1.6 million. But I wouldn’t know – because he decided to manage his own investments in the middle of 2023.
When I asked him why, he repeated to me almost verbatim what the DIY ads say: “this is easy, Vince, I can do it myself.”
I tell these two stories for three reasons:
- Even in modest market downturns, investors are their own worst enemies.
- It is the role of an advisor not just to invest your money - but to keep you invested no matter what.
- The couple and the individual referred to above took their business elsewhere for opposite reasons. I was fired by the couple because even though they were paying me, they weren’t taking my advice. The young gentleman fired me because he did take my advice but didn’t like paying for it.
Both stories still hurt to this day. I tried so hard to keep that couple invested. The S&P 500 is up more than 150% since the day they sold half their portfolio.
Sure, the second client paid me for my advice. But without it? He probably wouldn’t have turned that $1 million into $1.6 million.
These two stories illustrate something crucial: Investing isn’t the hard part—sticking to the plan is.
And that’s why, despite what the DIY marketers tell you, financial advice isn’t about picking stocks or timing markets. It’s about making sure you don’t sabotage yourself.
Good advice pays for itself not just in returns, but in the costly mistakes you avoid. It keeps you from selling at the bottom, missing out on compounding, or making emotional, short-term decisions that wreck long-term success.
Now, back to the first bullet point. What exactly is a financial plan?
A financial plan isn’t a stack of spreadsheets. It’s not a one-time event. And it’s not just an investment portfolio.
A financial plan is a strategy that:
- Grows with you. Your income, taxes, and investment needs will change - your plan should adapt with them.
- Prepares you for uncertainty. Market crashes, job loss, major life changes - your plan ensures you don’t have to make desperate decisions.
- Gets you to your goals, without relying on luck. Luck can make someone rich. Discipline keeps them rich. A plan makes sure you don’t lose everything by chasing short-term gains or avoiding necessary risks.
- Helps you make smart, long-term decisions. Should you pay down your mortgage or invest? Should you incorporate? What tax strategies should you use? A real financial plan answers these questions.
Most importantly, a real financial plan protects you from turning temporary setbacks into permanent losses.
