Investment advice for 20's & 30's crowd.

Younger generations get investment advice

People in their 20s and 30s have been left out of the financial-planning loop because they lack the one quality that makes them attractive to planners: wealth. The tide is changing, however, as more people in this demographic look to make investments including 401(k) plans and property acquisitions. The financial industry is answering by targeting more services for this young demographic.

Financial Planning for the Not-Yet-RichIndustry Targets More Services at Long-Ignored DemographicOf People in Their 20s and 30s; 'We're Behind the Eight Ball'By JEFF D. OPDYKE
Financial planners are beginning to pay closer attention to people in their 20s and 30s, a group that has long received the brushoff from the financial-services industry because of its lack of wealth.

Many people in this age group, launching careers and starting families, are looking for a wide range of financial advice. Among other things, they need help investing in their first 401(k) plans, saving for a house, understanding insurance needs and managing debt and budgets.
And lately, they're finding a financial industry increasingly willing to help. Though the bulk of the industry's efforts remain focused on the baby boomers and retirees with the fattest wallets, planning firms and some brokerage houses are beginning to provide services aimed squarely at a younger demographic. These clients are younger than the relatively established middle-age set traditionally targeted by the firms. But a growing number of planners recognize the possibilities of taking on clients who they suspect will work or inherit their way into larger wealth in coming years.

Marta and Jake Kagan -- she's 35 and a marketing manager, he's 32 and a physician still in residency -- knew they needed help when they began a hunt last year for their first house. The Boston couple has student loans to pay off, two children to provide for and live in a place "where we can't buy a starter home for under $500,000," says Ms. Kagan. "We feel like we're behind the eight ball relative to where our parents were."

Four months ago, they hired Stacy Francis, a 32-year-old New York planner, largely because "I want someone closer to my age, closer to our realities," Ms. Kagan says. Ms. Francis, a fee-only planner, provided the Kagans a year-by-year plan. "It's a conservative, clear view that looks at our future more broadly so that we can see how to get from point A to point B. We've decided to wait before we look for a house."

For the most part, people like the Kagans are largely underserved by the financial industry. Research by the Financial Planning Association, an umbrella group for planners, shows that just 11% of the industry's client base is under the age of 40, though that same research also indicates that people approaching 40 are the most eager for financial advice.

Jennifer Cray, a planner in Menlo Park, Calif., says demand from younger clients is so great that she now turns away potential business because she's already loaded with people in this age group. Ms. Francis has begun hosting seminars for younger clients, who now account for half of her business. And in Dallas, Kalita Blessing, a planner with Quest Capital Management, says a quarter of her business is now young people because "so many parents are gifting financial plans to their kids." Those parents recognize that their offspring often have large debts from school loans, likely won't have pensions to rely on, and could face a sharply altered Social Security system at retirement.

Tom and Donna Dietrick, a Mount Lebanon, Pa., couple, went looking for a planner last year to help wade through the abundance of investment and savings options that boomers never had when they were younger -- everything from online savings accounts to Roth IRAs and 529 college savings plans. Mr. Dietrick, a 38-year-old worker at US Airways Group Inc., says he and his wife "got to a point where we said we've got to find someone who can help us prioritize because there are so many options and philosophies on what's best to do."

The Dietricks hired Pittsburgh planner Bob Nusbaum, with whom they spent five or six hours over several sessions. Mr. Nusbaum rearranged their portfolio and helped them begin looking toward retirement, their life-insurance needs and their kids' education. "We don't have an enormous amount to invest, and we just want to know it's doing its best," Mr. Dietrick says. The planner "even looked at our budget and told us we're not spending enough on leisure."

The best time for young people to consider hiring a financial professional "is when you land your first real job," says Barbara Roper, director of investor protection for the Consumer Federation of America. "At that point, you have a variety of financial issues to consider, such as your 401(k) plan and your benefits," and a financial plan will set you on an appropriate course, she says.
For savers with modest assets, Ms. Roper says, a fee-only planner is generally the best match. These planners only sell their time, at a cost of between $100 and roughly $250 an hour, depending on where they're based geographically. Because they don't pitch products tied to a particular company, "it minimizes the potential conflicts," she says.

To find local planners, consumers should ask friends, family and colleagues if they can recommend someone they trust. Several Web sites, including the National Association of Personal Financial Advisors (napfa.org), the Financial Planning Association (fpanet.org) and the Garrett Planning Network (garrettplanningnetwork.com), which emphasizes planners who charge by the hour, offer locator services to help find planners in your area. Planners with a CFP designation, for certified financial planner, have passed a comprehensive exam that typically requires multiple years of study.

Jennifer Billock, a 36-year-old San Francisco grad-school student, says she and her husband, Jim, have worked with several different professionals -- from big brokerage firms to various financial planners -- and "all we ever got were computerized asset allocations that cost $400 to $1,500," she says. "We don't have much money, so it seemed irrelevant."

The couple then went looking for a financial pro "who is objective, and would do more than just portfolio planning," Ms. Billock says. After a three-month search they found Ms. Cray in Menlo Park, a fee-only planner who charges $240 an hour, or a retainer of between $290 and $490 a month for unlimited access.

"She went through all this insurance stuff I never thought of, and helped with our cash-flow analysis. When we were setting up a 529 plan for our daughter, she told us the firm's expert was just finishing new research and to wait a bit for the analysis. So she's not giving us canned answers."

Some young people want a hand on their money. Tim Leidig, a 28-year-old applications analyst in York, Pa., says he seeks advice from Mr. Nusbaum, the Pittsburgh planner, on everything from where to invest his 401(k) plan to whether he should pay off his student loans quickly or use that money for other financial needs. But then Mr. Leidig tracks down specific investment options and makes his own decisions.

"I feel like I'm getting totally independent advice," Mr. Leidig says. "And I remain in charge of my assets."

Some savers want not just planning, but money-management services, as well. That adds extra charges, either through commissions or an annual fee based on a percentage of the assets under management, usually up to 1% or 1.5%. If you're a buy-and-hold type of investor, paying commissions for money-management services can make the most sense, because these can work out to be less than continually paying an annual management fee when your portfolio doesn't change.

Lifesyle and Life Events Financial Planning Stages (diagram)

Write to Jeff D. Opdyke at jeff.opdyke@wsj.com
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investment advice, financial planning, lifestyle, life events, savings