When it come to investing, youth is no handicap

When it comes to financial matters, young people might be wiser than their elders, according to a study from Charles Schwab & Co. Inc. of San Francisco.

“Younger generations aren’t counting on pensions or Social Security,” said Dave Welling, vice president of adviser practice management with Schwab. “They realize their lives are in their own hands. They realize their financial health is in their own hands. I think that’s really encouraging.”

For instance, 61% of respondents from Generation Y, ages 21 to 32, said they will need to use their own resources for retirement, compared with just 42% of baby boomers.

The need to fund their own retirements might explain why members of Generation Y are more trusting of advisers than the silent generation, ages 62 to 83; baby boomers, ages 43 to 62; or Generation X, ages 32 to 43.

For instance, the average Generation Y respondent to a question on whom they trusted to provide reliable information about financial security during retirement thought financial advisers earned a grade of B.

By contrast, the average respondent from older generations thought financial advisers had earned a grade of C.

Harris Interactive Inc. of Rochest-er, N.Y., conducted the study, which was completed online by 3,866 people between 21 and 83 from March 28 to April 22.

The study showed that respondents from Generation Y are more open to advisers, compared with respondents in any of the other generations, creating an opportunity for advisers to market to younger individuals, said Mr. Welling.

While advisers don’t target younger people because many have not accumulated much wealth, they should meet their clients’ children who are in their 20s or 30s. They should start thinking about how they can build a relationship with them.

“That doesn’t mean you need to be their financial adviser right now,” said Mr. Welling.

Many of the clients of Richard Feight, a 35-year-old adviser in Grand Rapids, Mich., are young.

In January, the 11-year financial services veteran opened his own firm, IAM Financial LLC, which manages around $3 million in assets.

Mr. Feight has found that younger clients are more trusting of him and his advice than are clients from previous generations.

“I’m surprised that a lot of the time you can find someone in their late 20s and 30s with a high in-come,” he said. “The assets may not be there yet, but they want to make sure they’re saving $15,000 a year.”

Many of Mr. Feight’s clients are on target to have $1 million in investible assets by the time they hit their 40s.

“The beauty of a Generation Y person is typically they don’t have a lot of assets, but if you can get them to put away as much as possible” before they start purchasing large-ticket items, they will be ahead of the game, he said.

However, advisers paid on commission might have a more difficult time attracting younger clients.

It is easier to work with younger investors when an adviser’s services are fee-only rather than based on commission, said William Keffer, a financial adviser with Keffer Financial Planning in Wheaton, Ill.

He doesn’t manage assets, a business model that allows him to work with younger workers who have not accumulated much wealth. For example, a small firm hired him to provide financial plans for all six employees, all of whom were in their late 20s or early 30s. Most of their issues dealt with paying off debt, maximizing 401(k) contributions and saving to purchase a home, Mr. Keffer said.

“Fortunately, the income levels were good. No one was making fabulous money,” he said. “But they are all making fairly good money for their age.”

E-mail Lisa Shidler at [email protected].