Advisers spend all their time looking towards the future: that’s the name of the game. Tools like the Now:Plan Cash Flow modeller and Now:Plan Pension Income modeller are designed specifically in aid of making that picture as clear as possible.
For younger people however, that financial future is looking like a pretty scary prospect. Newspapers are doing their best to convince us that the mounting difficulties facing millennials threaten their chances of achieving financial independence, owning a house or paying off their student loan.
Could it be possible that in the face of these challenges, we need to be talking to our children about their finances from a much younger age? Beyond that, can we use technology to present information and advice in a way that’s easy to understand?
We met with Ellie Clark, a very unique financial planner who has joined the industry following ten years as a primary school teacher. Ellie is adamant that we need to drive change by teaching our children how to manage money.
Ellie isn’t alone in thinking this. Back in April, as part of Financial Literacy Month in the U.S., comedian Kate McKinnon joined forces with New York Times bestseller Beth Kobliner to talk to kids about money. The results are hilarious as well as going to show that children are more capable of grasping economic concepts than we sometimes give them credit for.
This is something that Ellie feels passionately about: “children at that age are like sponges. They take everything in. It’s dangerous to not make the most of that and educate them about finance at that point.”
“When I joined the financial planning world I felt that we were completely missing something. I felt there was a huge knowledge gap that could be closed if we start with youngsters. Things like debt are ongoing problems and they don’t need to be. It’s down to education — that’s why I’m so passionate.”
Ellie’s approach to financial advice is hugely influenced by her previous career as a primary school teacher. Though they seem like polar opposites, Ellie is surprised by the transferable skills: “once I started training I realised how similar the professions are. They both require fantastic people skills.”
“People are more willing to discuss their marital problems than their money problems.”
Those fantastic people skills are especially important given that people are still so taboo about money. A survey by Totally Money found that ‘Money’ was voted as the ‘most uncomfortable’ topic of conversation — beating Politics, Religion and Sex. This demonstrates the task facing financial advisers when it comes to putting their clients at ease.
Ellie is hardly surprised by this: “people are more willing to discuss their marital problems than their money problems. It shouldn’t be so awkward — and if we were nurtured in how to talk about it from a very young age then it wouldn’t be.”
As Ellie transitioned from standing at the front of the classroom to being behind a desk studying for her planning exams she reflected on her own financial education. Ellie’s parents are financial advisers but “funnily enough I really didn’t understand a lot about financial planning or products until I started studying.”
“I had a lot of the behaviour behind finance impressed on me. In terms of learning specific money skills there was no formal education that I can remember, and if I can’t remember then it wasn’t a very valuable experience.”
“I fear that there is a whole generation that has been missed completely. I was a teacher for 10 years and maybe twice I taught a practical lesson about finance where the children took something tangible away.”
It’s not that financial skills are absent from the curriculum, but they certainly seem to lack emphasis on problems that most people are likely to face, Ellie expands.
“We teach coin recognition and problem solving with money, but these are problem solving skills not financial skills. We teach nothing about budgeting, nothing about saving, nothing about how to earn money or what to do with it. For older children there’s nothing about tax returns, credit cards, debt, loans, mortgages.”
“I don’t understand how there is a main life skill that we use every day that doesn’t feature on the curriculum.
It really starts to impact those children when they become adults. One study by PwC found that 42% of millennials have turned to payday lenders and pawnshops in the last 5 years. The more that these bad habits perpetuate themselves, the less likely it is that millennials will ever be proactive about investing and seeking financial advice.
“When you’re aged 18 how many dodgy decisions do you make? It’s all part and parcel of learning about life, but with money you can’t take the risk.”
“If you haven’t got the knowledge there’s no understanding. Take payday loans for example — maybe you see quick and easy money and don’t consider consequences.”
Crucially, it’s never too late to change. And Ellie believes that technology can “absolutely play a role.”
To engage millennials, Ellie is adamant that firms have to have a digital presence: “thinking from a business perspective; it is important for planners to build a relationship with millennials now — you could look after a client from age 18 to age 80 and ride the ups and downs with them.”
But Ellie is looking beyond the apparent million-dollar millennial question and to an even younger generation: “young kids are so savvy. My children are 2 and 3 and they can scroll around on phones knowing exactly what to do. It would be silly not to make use of it.”
“I can imagine children having a go on a Cash Flow modeller — it would probably look like another game to them, but they would be learning. There are already a couple of different games out there that loosely educate on savings and money skills, there is definitely potential to design something more tailored.”
“Technology is moving so fast. We don’t rely on cash anymore so my toddler sees me using Apple Pay — what are they thinking in their head? That phones pay for things? What we teach our children has to move with the times.”
Ellie tries to teach her children as much as possible by being honest with them. “My daughter is three years old and always full of questions — so I have no doubt she is ready to learn these skills.”
“I talk to her a lot about how Mummy and Daddy go out to work to get money for the family. I talk to her about what we can’t afford this month, but we can put money away and save up for it. She’s learning and we don’t shy away from talking about it, which is key.”
“It’s not going to be long before I want to start her with a bit of pocket money — just 20p here and there — for me it isn’t the value of the coins, it’s teaching her to save up.”
Ellie grew up with a mother who worked as a financial adviser, has that shaped her view?
“What my mum achieved was amazing. She says that the industry was very different when she started.”
“It’s difficult for women with young children — highly skilled women find it difficult to return to work after having children and there aren’t enough opportunities to support these women. It doesn’t seem to impact men as much as it does the women.”
From working as a primary school teacher, to raising two young children to becoming a financial adviser, who could be better placed than Ellie for insight on how to engage the younger generation?
The routes forward are clear: that technology is imperative as well as more practical financial education for the public. Every financial adviser knows that conversations with clients often revolve around their children, and that the transfer of wealth is inevitable. In the most long-term and rewarding of relationships, an adviser might go on to advise their clients’ children.
The earlier we start talking to children about finances, the easier it will be to overcome embarrassment and have meaningful conversations about money. The lifting of that taboo may also go some way in encouraging more people to take the step to seek financial advice. A sophisticated Cash Flow modeller like Focus’ Now:Plan is comprehensive enough to handle the ‘awkward’ pieces of personal finance — niggling debt or credit card repayments — and the capabilities of this technology will aid the honest conversations advisers are able to have with their clients.