Time on Your Side: A Guide to Millennial Investing

November 11, 2019

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Written by: Bankrate Staff |

Millennials (individuals born between 1981 and 1996) number 83.2 million and are characteristically known as the largest, best-educated and most diverse generation in U.S. history. However, saving for retirement, budgeting and establishing and maintaining a financial plan remains a challenge for millennials, according to the National Institute on Retirement Security.

Nearly half of all millennials are already concerned about their ability to retire when they choose and two-thirds are concerned about outliving their retirement savings. Crushing student loan debt has also crippled this generation’s ability to invest.

Millennials’ slower start to investing can also be attributed to watching their parents go through the Great Recession of the late 2000s and early 2010s. They may be more wary of the stock market, which can inhibit their willingness to take risks.

In fact, three in 10 millennials say cash is their favorite long-term investment, but a third of Gen Xers, 38 percent of baby boomers and 44 percent of the Silent Generation invest in stocks. Millennials have traditionally preferred saving their money rather than investing and view savings accounts as a safer bet than the stock market.

If you’re a millennial, Bankrate’s guide can help you determine why it’s important for you to invite risk, how to determine your investment goals and how to get started in the stock market.

Why should millennials invest?

Because they witnessed the Recession, you may perceive investing as risky, but not investing is actually riskier. “The worst thing you can do in your mid-twenties to mid-thirties is not saving money and invest. If you invest money early on, it gives your money a long time to grow,” says Mike Kerins, founder and CEO of RobustWealth. He says that in spite of the ups and downs of the market, it’s rare that the stock market stays down for a long period of time.

Stock investments deliver bigger returns over cash and bonds in the long run. Money sitting in savings accounts is stagnant and subject to rising inflation, whereas stock market investments can compound over the years. More specifically, large-capitalization stocks returned 10% compounded annually from 1926-2018. Over that same time period, long-term government bonds returned only 5.5% annually and T-bills returned 3.3% annually.

“The surest way to build wealth over long time horizons is to invest in a diversified portfolio of common stocks,” says Robert Johnson, professor of finance at Creighton University and chairman and CEO of Economic Index Associates.

The other advantage of saving money over time is that it’s like a snowball effect. “Millennials need to begin compounding early and let that compounding work its patient magic over decades,” says Johnson. Compounding means that when you earn interest on your investments, you earn interest on the interest.

For example, if you start investing $6,000 per year when you’re 25 years old, you’ll have a larger return than if you just deposited that money in a savings account or under the mattress.

Evaluate how much you’re able to invest

Just getting started is critical for any young investor. How does a 20-something novice investor with a modest income (who’s also likely making payments on student loans) get into the market in the first place? The first step is to determine your current situation.

Calculate your total debt

Put pen to paper (or get a budget app) and figure out how much money you make per month minus how much you have going out. Consider:

• Rent or house payment

• Student, auto and other monthly loan payments

• Credit card monthly payments

• Other debts or required payments

After you figure out generally how much it costs you to live on a month-to-month basis, you can determine how much extra you have to invest.

Next, determine how you’d like to approach your student loans, credit card debt and any other debt you have. Aim to pay off your high-interest debt first (called the debt avalanche method) or pay off your smallest amount of debt first (debt snowball method). The research shows that it’s much easier to stay motivated when you pay off smaller debts first because you get a quick win right away.

Mike Broker, chief strategy officer at Trilogy Financial, says, “You can start small while paying down large student loan debts or working on other obligations, but start to save for your future now.”

Determine your financial risk level

The Recession may leave some millennials with residual nervousness about the ups and downs of the stock market — but these ups and downs are normal. Consider goals-based investing to specifically invest for specific time horizons. In other words, if you have a short-term goal, such as saving for a house in a few years, you might consider investing more conservatively.

Decide where your investment funds will come from

Where will you pull your extra money for investing? From your savings account? From loose dollars you have in your checking account at the end of the month? What if you have no extra cash for investing and need to come up with an alternative plan? Here are several options for getting started.

Savings

If you have some money stashed in a savings account, you might consider it seed money for your investment accounts. Many companies require you to invest a minimum amount of money to get started. For example, the minimum initial investment for Vanguard Target Retirement Funds is $1,000. A $3,000 minimum applies to most other Vanguard mutual funds.

Set an investing budget

Once you determine how much you have leftover at the end of the month, put that money to work for you directly into an investment account at the end of the month. Amounts might vary per month (the car might inevitably need a new alternator) but at least you have an idea of a general amount to budget toward investing per month.

Educate yourself on stock market basics

Financial lingo can seem intimidating, but as you learn more about stock market basics and stay up to date on financial news, your financial knowledge will grow.

Beginner investing terms you need to know

Check out Bankrate’s full glossary of investing terms, but here are a few must-know-now terms:

Bonds: Bonds are loans made to large organizations, including corporations, cities and national governments. The interest payment (called the coupon) is what bondholders earn for loaning their funds to the issuer.

Brokerage account: An arrangement between an investor and a licensed brokerage firm where the investor can deposit funds with the firm and place investment orders through the brokerage.

ETFs (exchange-traded funds): An ETF is a basket of securities you buy or sell through a brokerage firm on a stock exchange. ETFs are offered on virtually all asset classes ranging from traditional investments to alternative assets like commodities or currencies.

Mutual funds: A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.

Stocks: Stocks are securities that represent an ownership share in a company.

Financial news and education

Stay up to date on financial news/general stock market news, which you can find on any major news source. Brokerages such as Fidelity have a ton of free beginner investing resources and educational tools to help get you started on the right track. Do research on your own to determine what might work best for you.

Many millennials are interested in socially responsible investing (SRI), which can blend in investing with socially responsible causes to bring about a positive change. Studies have found that millennials prefer to invest where their money can make an impact. In fact, U.S. Trust found that 76 percent of high net-worth millennial investors have reviewed their assets for SRI impact and Morgan Stanley found millennial investors to be twice as likely as others to invest in companies that incorporate socially responsible practices.

Determine your long-term and short term goals

Short-term and long-term investing both require a different approach to investment goal-setting.

Short-term investment vehicles

Paying off student loans, vacation funds, financing a dream purchase, buying a house — all of these are considered short-term goals. Paying off student loans could also be considered another short-term goal.

If you have a short-term investing goal, consider savings accounts, short-term bond funds, money market accounts or certificates of deposit (CDs).

Savings accounts

Savings accounts are bank accounts that earn a small amount of interest. Marcus by Goldman Sachs Bank is a great place to start, and offers a high-yield savings account with a competitive APY. The best savings account rates will not net you too much interest at all, which is why

they’re ideal for short-term investing. Never invest any funds earmarked for retirement in a savings account.

Short-term bond funds

Short-term bond portfolios typically involve corporate and other investment-grade U.S. fixed-income issues from one to three years. These portfolios are attractive only if you have a short savings horizon because they are less sensitive to interest rates than portfolios with longer durations.

Money market accounts

Money market accounts are a lot like savings accounts. Unlike savings accounts, where your bank or credit union can only loan out your cash, in the case of a money market account, the bank can put your money into low-risk investments such as certificates of deposit or government securities.

Certificates of deposit (CDs)

CDs are money invested for a set period. The issuer pays interest at regular intervals until a specific date of maturity. Once your CD matures, you receive your original investment, plus all of the interest you’ve accumulated during that set period. This is only a good option if you can be sure you won’t need your money before maturity. You’ll have you have to pay a fee in order to withdraw the funds before maturity.

Long-term investment vehicles

It’s fine to have some short-term investments, but millennials should always have some sort of funds invested for long-term goals that you can turn into college funds for future children, a second stream of income and/or retirement.

Some excellent long-term investment vehicles include equity index funds, equity ETFs and mutual funds.

Equity index funds

Compared to bond market index funds, equity index funds can offer more risk (which is what you want when you have a longer time horizon). Your returns are higher compared to a bond market index fund, and equity index funds offer you the advantage of a hands-off, diversified, low-cost method of long-term investing.

Equity ETFs

Equity ETFs track an index and usually offer low expense ratios. You can also buy a basket of investments in a single fund, which offers ample diversification. They trade like a stock and are higher risk compared to a bond market ETF, ideal for long-term investing.

Mutual funds

Mutual funds deliver diversification, a distinct advantage compared to choosing individual stocks (a much riskier approach). A disadvantage of mutual funds is that they’re typically more expensive to manage over the long-term because they’re professionally managed.

Investing for retirement

More than any other generation, millennials are interested in work/life balance, saving and retiring early. You don’t need to work for an employer to invest for retirement, but if you do work for an employer, Kerins says it’s important to take advantage of your company match.

In order to take advantage of the company match, you must put in a specified amount of money into your company’s retirement fund. Under current regulations, an employee may contribute up to $19,000 of pre-tax earnings to an employer-sponsored 401(k) plan ($25,000 if you’re age 50 or older).

If you want to invest outside of your company’s 401(k) match, or your company doesn’t offer a 401(k), open an IRA. A traditional or Roth IRA are good choices. For 2019, your total contributions to all traditional and Roth IRAs cannot be more than $6,000 ($7,000 if you’re age 50 or older) or your taxable compensation for the year, if your compensation was less than this dollar limit.

How to get started in the stock market

It’s possible to go it alone or get help from a financial advisor or through other methods, but you can also go the DIY route and open investment accounts with a low-cost provider like TD Ameritrade, Fidelity, Charles Schwab or Vanguard.

DIY options

Broker says, “As a generation, millennials mostly like to be hands-off and make things automated, so send money to your savings account, Roth IRA or whatever vehicle is right for you automatically every month.”

For millennials who want to do the research and/or choose their investments completely solo, certain brokerage accounts are geared toward beginning investors, such as Robinhood or Fidelity. Monitor your portfolio to make sure you’re on track with your investment goals.

Guided investing

If you’d like guidance in building your investment portfolio, consider using robo-advisors. Robo-advisors are investment management companies that rely on computers rather than human beings to help you choose your investments. (Though some robo-advisors do allow you to talk to actual financial advisors.) Robo-advisors ask questions about accepted risk level, time horizon and overall financial goals to give you the best asset allocation possible and rebalance your portfolio over time.

The most important thing to remember? Just get started. With time on your side, Johnson says you have so many options at your disposal. “Time is the greatest ally of young investors because of the magic of compound interest,” he says.

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But financial advice rarely comes free, and college planning is no exception. Families who purchase a 529 plan through a financial advisor often pay a sales charge in addition to the plan’s underlying mutual fund fees. The amount of commission an advisor earns depends on the mutual fund share class selected within the 529 plan.

Under the suitability standard, broker-dealers must have a reasonable basis to believe their share class recommendations are suitable based on the client’s needs and investment profile. The Financial Industry Regulatory Authority (FINRA) recently launched a 529 Plan Share Class Initiative to improve the supervisory practices and procedure of broker-dealers who sell 529 plans.

Two areas of concern were brokers who were recommending share classes to beef up their commissions, and the change in tax code that made K-12 tuition a qualified 529 plan expense.

A Sneaky Sales Practice

Advisor-sold 529 plans offered through brokerage firms (Merrill Lynch, Morgan Stanley, UBS, etc.) are typically sold as Class A shares or Class C shares. Class A shares have an upfront sales charge (as high as 5.75%) and low annual fees, and Class C shares have no upfront sales charge with higher annual fees.

Generally, Class A shares are recommended for 529 plan beneficiaries who have a longer investment time horizon, since there is more time to absorb the cost of the upfront sales charge and the investor will benefit from the lower annual fee.

But, some advisors intentionally placed clients with young children in Class C shares to collect the higher ongoing sales charges.

Shorter Investing Time Horizons for K-12

As a general rule of thumb, some broker-dealer firms recommended Class A shares for all beneficiaries younger than 12 years old. This was considered a suitable investment since the child had at least six years until college.

However, the Tax Cuts and Jobs Act of 2017 allows families to use up to $10,000 per year of 529 plan savings to pay for K-12 tuition expenses. Families paying for K-12 tuition typically have a much shorter time horizon than those saving for college, and therefore have less time to absorb the cost of an upfront sales commission.

How Broker-Dealer Firms are Responding to the Initiative

Many broker-dealer firms now use a suitability questionnaire and breakpoint calculator to see which share class is the best fit. FINRA supplied firms with a framework for the calculator, which provides a recommendation for Class C shares or Class A shares based on the investor’s time horizon.

Jeff Motske, President at Trilogy Financial Services in Orange County, CA, says that some broker-dealers are very strict about share class recommendations. Advisors are expected to understand the client’s investment goal and time horizon and keep documentation.

“With these new rules and regs, you’ve got to be examining pricing as part of your planning practice with your clients or you’re just not meeting the standard,” says Motske.

Russ Ryan, formerly FINRA’s Deputy Chief of Enforcement and a partner in King & Spalding’s Special Matters and Government Investigations team, says that although the deadline to self-report violations to FINRA has passed, taking a look at a firm’s supervision is a good business practice.

“The initiative may be prompting brokers to ask more questions of their customers before they make a recommendation to make sure they really do understand all the facts and circumstances of the customer’s situation and making sure that they are recommending the right type of 529 share class,” says Ryan.

How 529 Plan Fees Affect Your College Savings

With almost any 529 plan, the investor pays annual mutual fund fees. Direct-sold 529 plans typically invest in passively managed funds (such as index funds) with very low expenses. However, many advisor-sold 529 plans invest in actively managed funds with expenses as high as 1% and come with an additional sales charge to compensate the advisor. A 529 plan's expense ratio also varies by share class.

Even a small difference in 529 plan fees can add up over time. For example, if you invest $100,000 in a 529 plan with a 1% expense ratio you would pay $1000 in fees. If you instead invest in a 529 plan with a 0.10% expense ratio you would only pay $100 fees that year.

And remember, a 529 plan’s annual expense ratio is based on a percentage of assets in the account. So, as your account balance grows you end up paying more in fees. The more you pay in fees, the less money you are investing for your child’s college education.

Alternatives to Broker-Sold 529 Plans

Advisor-sold 529 plans are also sold by registered investment advisors (RIAs). RIAs have a fiduciary duty to put their clients’ best interests first. Instead of Class A shares or Class C shares, some RIAs place 529 plan clients in no-load share classes, such as Class I shares. The sales charge is waived, and the advisor typically charges an hourly rate, or an AUM advisory fee based on the assets in the 529 plan.

But, not all RIAs charge for 529 plan advice. Matthew Murawski, a financial planner with Goodstein Wealth Management, LLC in Encino, California offers pro-bono college planning advice to clients. His firm recommends 529 plans with low-cost index funds, no sales charge and no asset-based fee.

In Murawski’s experience, consumers are generally unaware of 529 plan share classes and that they can usually get the same investment at a lower cost. He recently helped two clients roll existing 529 plan assets from Class A and Class C shares to lower-cost Class I shares.

“Even if we were charging for it, let’s say we had an asset fee on there, we would still be saving you an incredible amount of money over the lifetime of the 529,” he says. “Fees really add up over the lifetime of a 529.”

Another RIA option is U-Nest, a college savings app that determines an optimal 529 plan investment portfolio based on your child’s age and time horizon. The funds are invested in Class I shares of the CollegeBound advisor-sold 529 plan managed by Invesco. Instead of charging an hourly rate, there is a $3 per month fee to use U-Nest.

According to Ksenia Yudia, Founder and CEO of U-Nest, the app is ideal for low- to middle-income families who may not be comfortable investing in a direct-sold 529 plan.

“Direct-sold plans come with certain complications, meaning the clients need to be comfortable opening their own investment account without the help of a financial advisor,” she says. “They need to have at least some basic knowledge of finance and investing.”

Final Thoughts

Families should regularly review their 529 plan to make sure the investments are still appropriate for their situation. It's perfectly reasonable to ask your advisor about which 529 plan share class you are invested in, especially if you have concerns.

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5 Things You Need To Know To Successfully Manage a Team

March 20, 2022

By: Authority Magazine |

—

As a part of our series about the five things you need to successfully manage a large team, I had the pleasure of interviewing Windus Fernandez Brinkkord.

Windus is an senior vice president at Trilogy Financial, a national financial advisory firm. One of the things that sets Trilogy Financial apart from other firms is the dedication to cultivating a team that can best serve and advise everyday Americans. To Windus and her team, the term “everyday Americans” means everyone from hardworking employees to business owners and savvy investors, to new couples and more who want to build the businesses and lifestyles they dream. What Trilogy recognized was that in order to be a true fiduciary to its clients, they needed to be able to relate to them. And how better to relate to them than to build multi-generational teams that could relate to every family member, life event, dream and experience? Windus helped develop these teams within each Trilogy office while leading her local San Diego office to be one of the most successful offices in the company. Her dedication to her team has led to the success of her clients.

Windus Fernandez Brinkkord is a Registered Representative with, and securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through TC, a Registered Investment Advisor. TC markets advisory services under the name of Trilogy Financial (TF), an affiliated but separate legal entity. TC and TF are separate entities from LPL.

Thank you so much for doing this with us! What is your “backstory”?

I’m a third generation Californian and second generation San Diegan. I was raised in the community of Ocean Beach, which attributed to my love of the water. My husband is a cancer survivor and after his remission we adopted two babies, a brother and sister, and they are the joy of our lives.

My family has always been in property management, and after I spent some time in the industry, I realized I wanted to help build, create and foster an awesome culture for other professionals to grow their business. So I joined Trilogy Financial in 2003, and paired my determination with my commitment to relationships in my life.

I grew up at Trilogy and have really grown through management changes, industry changes and a company restructure that have all led me to the success I have today. Over that time, I went from being mentored to being the mentor. I used to reach out to so many of Trilogy’s top producers for help and bread crumbs on how best to succeed and then eventually, with their help, my career became the career I had always wanted. I couldn’t have done it without the guidance of so many people at Trilogy.

Today, I work with clients to visualize the pathways to their success so they can decide which route is better for them and help them change gears should their chosen pathway not be as productive as anticipated. Ultimately, I strive to help clients understand that success isn’t achieved with the first plan, but with their long-term relationship and commitment to work together.

Can you share the most interesting story that happened to you since you started your career?

I had met a person at a bazaar at their company, and they told me they were really interested in financial planning. So I called, left a message. Heard nothing. I called again and then again, and for 8 months I called to check in with them. Finally, they answered!

They had been in Africa for work and were so impressed with my follow through they became clients. Today, they are one of my largest clients and a tremendous referral source.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

I don’t know that mistakes in financial planning are particularly funny, but I can look back on this one and giggle. I once asked me to wire them money for a trip, and I mixed it up. They then left on this trip! Instead of wiring it to them, I wired it out of their bank account. It was complete chaos, I had to reverse wires and chase them down while they were in the Bahamas on vacation. Lucky for me they are the nicest people and I was able to quickly correct it once I reached them. I learned that slowing down and doing things right the first time is critical, and it has made me a better advisor over time.

Ok, let’s jump to the core of our interview. Most times when people quit their jobs they actually “quit their managers”. What are your thoughts on the best way to retain great talent today?

I think one of the best ways to retain talent today is to be transparent and a good communicator. If you are transparent with challenges on the team and you’re proactive with an annual strategic plan, you are more likely to ensure everyone on the team is rowing the same direction. I believe that even in the best of circumstances “thinking things are fine” is definitely going to bite you in the toosh, so you should always be proactive. Often times, there are issues lurking within team. By having everyone aligned on the direction, goals and roles, you are more likely to see issues as they arise and can then proactively respond — instead of reacting after someone is disgruntled and leaving.

How do you synchronize large teams to effectively work together?

My experience is mostly with a team of 15 and below, though I have overseen much larger teams as well. Which is not very large, but I believe if you have a good strategy and process, it can be evolved for larger teams. The best way to get a team moving is to give your attention to the best workers — which is contrary to what we believe is natural. We often spend more time with the people who are under performing and work on improving them. However, I believe we need lift up and put attention on the top performers who will carry the team. It’s important to still give the underperformers guidance, but be aware of the pressure they cause the better performers when they can’t keep up.

Here is the main question of our discussion. Based on your personal experience, what are the “5 Things You Need To Know To Successfully Manage a Team”. (Please share a story or example for each, Ideally an example from your experience)

The 5 things I think everyone needs to successfully manage a team are:

Have a Strategic Plan: Everyone needs to know the rules of the game and what they are playing for. If the goal of the team is to increase revenue by 25%, you need to deep dive and break down how are you going to get there. For example, what weekly and monthly activities can you do as a team to make sure you stay on track? What type of revenue is going to best get you to the goal? It’s about defining the game they are playing and the rules of this game, so that your team can stay motivated and on point.
Conduct a SWOT Analysis: The Strength–Weakness–Opportunity–Threat Grid is a good way for the team to acknowledge the positive while also being aware of any lurking negatives. When you run this exercise as a team, you get to know more about what the team is worried about. Once you discover what is keeping them up at night, you can often learn more about how to keep people on point and moving forward together. Also, it allows everyone to voice what they view as their own strength and weakness for the year. This should be redone at the start of each year after the Strategic Plan.
Run With Your Winners: It’s so easy to get focused on the team members who are less productive. As a team manager, they rent space in your head, make you upset and keep you up at night. And allowing them to distract you is a dangerous game. Reward your winners and they will keep their eye on the ball and pushing forward. With that confidence, you can focus on those who need to catch up and if not, then know a performance improvement plan is needed.
Keep Meetings Short and To The Point: Each Monday we have a standing team meeting where we assess what’s going on for the week and make sure there aren’t issues lurking. This meeting should be short, but productive. And it should including goals that people are working on weekly and monthly. This is very helpful in keeping people engaged with the Strategic Plan and what they need to focus on in order to contribute to that plan.
Trust Your Team: People need to feel like they have the autonomy to work on their goals without worrying that someone is looking over their shoulder. I believe the new generation wants freedom to excel and independence over micromanagers and if you don’t, they will vote with their feet.

What advice would you give to other CEOs or founders to help their employees to thrive?

The best piece of advice I have is to avoid being a control freak. Many of us feel that no one can do what we do as good as we do it…and that will be 100% accurate if you never give your team the chance to learn. Learning sometimes means mistakes and cleaning up their own messes, but then they become stronger and more capable faster.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

Our mission statement as a company is to provide opportunities for people to live their best lives. When people know what they need to save, they know what they can spend and then they can spend with the freedom from guilt. That is the feeling of satisfaction that more people need, especially with money. This is a small but growing movement, and I’d love to make it much larger!

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

My favorite life lesson quote is “do or do not…there is no try.” I hear this from my daughter all the time. And I tell her she will fail at 100% of the goals she never works toward. I believe people will eventually succeed when they put their mind to something. My old boss used to say “leave the word hope at church and when you come to work, get it done,” and it’s that same philosophy that I live and mentor by today.

Thank you for these great insights!

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Time on Your Side: A Guide to Millennial Investing

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