Younger investors more likely to drop advisors, embrace DIY investing – Investment Executive

Younger investors more likely to drop advisors, embrace DIY investing – Investment Executive

However, the appetite for professional financial advice breaks sharply along generational lines. A May 2021 report from global comparison site found that one-third of millennials said they planned to stop working with their financial advisor or were seriously contemplating it, compared with 21% of generation X and 11% of baby boomers.

Some financial experts are concerned that in the age of meme stocks, cryptocurrencies and the current bull market, young people may be overlooking the value of advice and urge DIY investors to exercise caution.

Jason Pereira, partner at Toronto-based Woodgate Financial, explained that since many young people are priced out of buying real estate in major cities, there’s a level of despondency that’s led to risky investments.

“A lot of DIYers feel stuck because they can’t do the next thing to get ahead, so they’re buying lottery tickets in the form of investments,” Pereira said.

“DIY can be fine. Absolutely,” he added, explaining that there are people in the DIY community reading the right blogs or getting the right advice and doing something akin to what a good financial advisor has done for them. However, he doesn’t think that’s the norm.

“I don’t see anyone talking about buying Vanguard’s balanced portfolio, for example, and letting it ride. It’s all GameStop and crypto and Tesla options and whatever the next fast buck is. There is no contemplation around sustainability or around security or around risk tolerance.”

Galen Nuttall, certified financial planner at Freedom 55 Financial in Belleville, Ont., said putting money away in the first place is one of the toughest aspects of investing.

“If DIY investing is helping millennials take that first step to save money, then that part is positive,” he said.

“But how they invest once they are saving gets a bit more tricky,” he added, noting that young people who benefit the least from DIY are those who are confused about where to start and don’t have the desire to figure it all out or are struggling to figure it all out.

For example, one area that DIY investors may overlook is which investments should go in which accounts, such as a TFSA, RRSP or non-registered accounts, Nuttall said.

“I’ve seen DIY investors have investments inside of a registered account that would eventually cause taxation problems that most people would be completely unaware of,” he said.

Some DIYers are unaware that some foreign investments will incur a withholding tax, even inside of a registered account, so they won’t reap the full benefit, he added.

Millie Gormely, a certified financial planner at IG Wealth Management in Thunder Bay, Ont., worries about increased interest in DIY among younger adults because the majority of millennials haven’t lived through a recession as an investor.

“People don’t realize what it’s like when the TSX drops 200 points in a day, and then does it again the next day, and then it does it again the next day and it does it for four months straight, which is pretty much what happened in 2008,” she said.

“A lot of people bailed …….


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