How Advisors Can Help Gen Z Navigate Retirement Planning

Gen Z – the age group with birthdates ranging from the late 1990s through the early 2010s – is the latest generation for advisors to work with and while many Gen Z’ers only recently entered the workforce or aren’t there yet, retirement planning is relevant to this group.

That’s good news for advisors, particularly those that are apprehensive about working with Gen Z. Before engaging with Gen Z clients, advisors need to recognize that Gen Z’s financial goals and feelings about investing are different from other generations, even those of millennials – the next closest age group.

Something else advisors need to acknowledge when working with Gen Z clients is that they’re a highly optimistic bunch. That doesn’t mean they’re detached from investment reality, but they feel good about knowledge bases and their starts to retirement saving, particularly if they have access to employer-sponsored plans.

Still, this is a generation that craves education and guidance, indicating there’s ample opportunity for advisors that want to work with this group.

Heed Gen Z Data Points

There’s no shortage of data, studies and surveys along gender, generational and demographic lines advisors can lean into prior to engaging with specific clients and that’s increasingly true with Gen Z. Some of these surveys are worth paying attention, including a recent BlackRock report that’s broad with regards to retirement, but contains plenty of noteworthy points on Gen Z.

“One of the most notable insights that came out of the survey is that Gen Z says they are putting away 14% of their income for retirement, which can be a large percentage for anyone, especially someone who just started working,” according to the asset management firm. “Even more encouraging is that 54% said that they are invested in a target date fund, and 20% plan to do so, more than any other generation.”

There’s compelling runway here for advisors to engage Gen Z on emotional and psychological levels. As BlackRock points out, Gen Z’s parents are younger baby boomers and Gen X – two groups that have endured their fare of dire economic environments. That’s one reason Gen Z appears to be chock full of diligent and why it could be a client-rich demographic for advisors.

“While this level of saving is great news for Gen Z’s long-term financial health, there is a caveat: 72% of Gen Z participants said they would save less for retirement if faced with other big-ticket goals,” adds BlackRock. “That said, education for this younger cohort will be important, so that saving for retirement will seem like less of a far off, abstract goal and instead one that will serve them well in the long run.”

Understanding Gen Z Values

The emergence of investing in-line with personal values started in earnest with millennials, but it’s a major priority for Gen Z. Translation: Advisors should prepare for conversations about environmental, social and governance (ESG) investing and related strategies.

“Notably, Gen Z participants say they would, on average, allocate 20% of their retirement savings to dedicated sustainable investments, compared to just 10% of all participants. There’s an emerging focus on sustainable investments, as they are seen as a way to manage risk and generate returns. It’s a long-term view for long-term savings,” concludes BlackRock.

With that in mind, now is an ideal time for advisors to discuss ESG and sustainable investing with Gen Z because those strategies are being tested this year amid soaring oil prices and the value resurgence. Of course, it’s not about changing clients’ minds. It’s about illuminating them to risk. Gen Z will appreciate it.

Related: How Advisors Can Effectively Communicate with Gen Z