The challenges Americans faced during the last two years have caused many to feel uncertain about their future, redefine what is most important to them, and rewrite rules to chart a new path. Northwestern Mutual’s recent survey about this shift, which it defines as "The Great Realization," identifies some of the current concerns of a growing number of Americans and their desire to plan the lives they truly want to live.
“In the survey, we found that most millennials and Gen Xers are planning at least one major life change in the next two years,” according to Tim Gerend, executive vice president and chief distribution officer at Northwestern Mutual.
Helping Americans turn their realization into reality should be a priority for financial advisors. So what is the first step in this important journey? “The first step in financial planning is to determine what the client’s unique goals are, and then develop a plan to enjoy life today, while also planning for the future,” Gerend said.
“Planning can feel overwhelming,” he said, “and commonly we hear that younger people have put it off because they feel they aren’t affluent enough, are intimidated, or think that shorter-term goals do not require a financial plan.” In fact, Gerend added, “our survey showed that 1 in 4 millennials and Gen Xers (24%) still think only of long-term goals like retirement or saving for college when it comes to planning.”
It’s also important that advisors take a personalized approach to each person and their specific goals. Every situation is unique, requiring a tailored plan that fits the person’s lifestyle and timeline, he said.
“Given what the last two years have taught us, they are not going to defer their dreams any longer,” Gerend said. “They will continue to pursue their life goals even if the economy experiences a sharp decline, because waiting for “someday” is no longer part of their plan.”
Study findings include:
• Many more people seem to be asking themselves: “If not now, when?” Sixty-nine percent of respondents said they worry that if they don’t start acting on their life goals in the next 12 months, they might never get around to them.
• Despite their urgency, fewer than 1 in 5 respondents (18%) feel completely prepared to start making progress toward those goals.
• Forty-eight percent have not made a financial plan yet, but most see having a financial plan in place as a potential hedge against inflation. They said that this could help them weather an economic downturn and allow them to still be able to meet their life goals.
“Overall, we’re seeing that most respondents are in the right mindset, but they need to create a deliberate, comprehensive financial plan and talk to a trusted expert to turn their realization into a reality,” Gerend said.
There are many reasons a growing number or consumers are experiencing “The Great Realization,” explained Gerend. First, this generation of consumers has seen one unprecedented situation after another, and continues to tackle tough times.
For example, at a minimum, he added, the global pandemic disrupted their personal and professional lives, but also allowed them to re-evaluate what’s most important. In fact, the last few years have made priorities come into focus for many people, and they’ve realized that waiting to make those life-changing decisions is costing them their happiness. These priorities may relate to lifestyle, family, career motivations – and everything in between.
What is holding them back?
According to the survey, 56% of respondents said that finances are preventing them from pursuing their life goals right away.
Most people aren’t sure how much they should be saving, spending or investing each month, Gerend said, and they don’t see how the pieces of their financial lives fit together. “We often say that people have fractured financial lives, with a bank account over here, an insurance policy over there, investments elsewhere – and it starts to feel akin to a messy junk drawer. That uncertainty creates anxiety.”
“Our mission is to free Americans from financial anxiety," Gerend said. “We’re seeing that millennials, specifically, are labeled as the generation with some of the worst anxiety, and overcoming this financial anxiety is the first step to understanding and improving their finances.”
By organizing their financial lives and providing them with specific answers to the questions they’ve wrestled with for years, they can act more intentionally and create more positive financial planning habits over time.
“With so many respondents from our survey thinking about starting their life goal planning in the next 12 months, we’d encourage people to act on those feelings of anxiety and urgency. The time truly is now. The sooner they can start working with a financial advisor, the sooner they can get started worrying less and living more,” Gerend added.
The 2022 Great Realization Study was conducted by Wakefield Research on behalf of Northwestern Mutual and included 1,000 American adults aged 26-57 who participated in an online survey in July 2022.
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].