Baby Boomers may be nearing retirement but their Gen Y children are more disciplined when it comes to financial planning.

That’s a key takeaway from a Northwestern Mutual study on the state of financial planning in America.

“We're encouraged to see that the youngest generation of adults appears to be taking demonstrable action," Greg Oberland, Northwestern Mutual executive vice president, said in a statement.

Respondents were asked to put themselves into one of four categories, when it comes to financial planning:

  • The largest group (40%) described themselves as "Informal." They have general goals but no specific plan in place.
  • Next (34%) came the "Disciplined." They have a plan in place but, despite the name, they don't always follow it.
  • Only 16% said they are "Highly Disciplined" in their financial planning. They rarely deviate from their plans to meet their goals. 
  • Nine percent consider themselves "Non-Planners," with neither specific goals nor specific financial plans.

Among the respondents, 24% of those in Gen Y said they were Highly Disciplined. This was far higher than the overall group and particularly the Boomer generation, where only 14% described themselves as Highly Disciplined.
“We have found that people in Gen Y not only said they are highly disciplined, they really are more highly disciplined than people in older generations,” Bill Taylor, vice president of financial planning at Northwestern Mutual, said in an interview. “It might be because they’ve seen their parents hurt badly when stocks fell in 2008, because of the decline of defined benefit plans, or just because young people have access to more information today.”

Therefore, Gen Y offers excellent opportunities for advisors. “Most of them want a financial plan,” Taylor said, “but relatively few advisors believe these young people want a financial plan. We have had success when younger advisors work with these young clients. As a rule of thumb, an advisor tends to have a natural affinity with clients who are plus or minus seven years of that advisor’s age.”

Although of half all respondents classified themselves as disciplined or highly disciplined in their financial planning, the study revealed a lack of satisfaction with the results so far. Among the total group, 63% said their financial planning needs improvement. The leading reason for this shortfall was a lack of time.

In this study, 69% of respondents said that the pace of society makes it harder for them to stick with long-term goals. More than one in four (26%) people said they often or always feel too busy to think about long-term goals while 31% said that the level of immediacy of society today, with 24/7 connectivity and accessibility, can be distracting.

"There's an interesting parallel that exists between managing your finances and managing your day-to-day life,” Oberland stated. “It's so easy to let short-term needs and wants overshadow more critical long-term goals. We're all susceptible, particularly today, as we're often overloaded with information and over scheduled."

Taylor said this perceived lack of time presents an opportunity for advisors to gain new clients.

“An advisor can be like a trainer at a gym,” he said. “Advisors can determine a client’s goals and provide the discipline to help this client stick to a plan. Working with an advisor can be presented as a better use of time than trying to do it yourself.”

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