Generational Advisor

Who Are These Creatures? Oh, They’re Our Children!

KNOW: The new Pew Research Center study on the Millennial generation is chock full of insight on what makes young adults (18 to 29) distinct from their elders. They are more politically liberal than older generations. They embrace technology, diversity and body art. But family values (as they interpret them) are supremely important. DO: This study is a valuable supplement to the research we have cited on Millennials' attitudes toward their finances. If you are targeting this market, you need to understand how young adults differ from your older clients. The Pew study will provide you a quick education.

Millennials, the Digital Generation

KNOW: Eighty percent of Millennials in Internet-connected households conducted electronic banking within the last month, according to a Fiserv study. They are more likely than older generations to interact with financial institutions via the Internet and cell phone than via face-to-face contact. DO: Millennials are hard-wired with a bias for digital communication, and that bias will affect how they interact with financial advisors. There is no consensus yet on how financial advisors should adapt. Start experimenting to see what works.

Understanding Boomer Differences

KNOW: While there are plenty of segmentation schemes identifying different types of Boomers, you'll earn trust among your Boomer clients if you treat each as unique, with their own specific set of needs.

DO: Within each generation there are similarities you can use for marketing and sales purposes, but it is your understanding of the individual differences that will help you build trust among specific clients.

Want to Die Rich? Stay Healthy.

KNOW: Healthcare costs are rising so rapidly that they could consume 80% of all increased income by 2035, according to a Congressional Budget Office analysis. Boomers, who will utilize the healthcare system more as they grow older (and often fatter), will be especially hard hit. DO: Make sure Boomer clients incorporate realistic assumptions about the future cost of healthcare into their long-term financial plans. And give them this advice: A good way to keep costs down is to stay healthy. You can't control what happens to Medicare, but you can control how much you eat and exercise.

From Capital Glut to Capital Scarcity

KNOW: The world is shifting from a global capital surplus to an era of capital scarcity as Boomers transition from their peak saving years to wealth-draining retirement. In its "Equity Gilt Study of 2010," Barclays Capital forecasts that long-term interest rates on government debt could double by 2020. DO: If the Barclays forecast is right, the conventional strategy for pre-retirees -- reallocating portfolios from equities to bonds -- could backfire in the decade ahead. Financial advisors should acquaint their Boomer clients with the risks associated with long-term bonds, especially government bonds, the quality of which, ironically, the mass retirement of Boomers is undermining.

Generations, Demographics and Marriage

KNOW: More than one out of three Gen Xers, Boomers and Silent generation members are not married, by choice. How does that match your current client mix? Are you ignoring over a third of your marketing opportunity? Do you know the demographic make-up of your client base?

DO: Pay more attention to the demographics of your clients, and your prospects. A good snap shot of each generation helps, like these from Met Life. Don't assume everyone over 35 is married or wants to be. Make sure your marketing and sales efforts are not biased towards married couples.

Yuckies, Kippers and SKIers

KNOW: Inter-generational obligations in the United Kingdom, the subject of much discussion of late, mirror trends in Canada and the United States. Adult children of Boomers are dubbed Yuckies (Young Unwittingly Costly Kids) for their prolonged financial dependence. Meanwhile, Boomers are increasingly more likely to go SKIing (Spending their Kids' Inheritance) than leave an estate. DO: Don't assume that the G.I. Generation or Silent Generation models of inter-generational relations apply. Boomers are more involved in their adult children's lives than their parents were -- giving generously to their children now and leaving less when they die.

Twelve Things You Need to Know about Social Security

KNOW: Americans increasingly wonder about the financial strength of Social Security, the foundation of of nearly every person's retirement plan. But the issues are so complex, the arguments so partisan and official Social Security documents so turgid to read. Where does one go for information? DO: We recommend 10 Things You Need to Know about Social Security" in the Chicago Times as thorough but easy-to-read primer. But urge clients to read the comments by Allen W. Smith appearing below the article. He adds two more very important things your clients need to know.

A Deeper Satisfaction

KNOW: The debate continues as to whether Americans' new-found propensity for thrift represents a genuine change of heart, or whether it's imposed mainly by financial institutions as they tighten credit standards. A recent New York Times article suggests that Americans are learning to derive more satisfaction from their experiences than their possessions. A Vanguard executive sees the business cycle at work. DO: We think that the value shift is real. Americans are rediscovering basic truths about the source of happiness. As you discuss your clients' life goals, be attuned to the possibility that they want different things out of life than they did a few years ago.

More Bad News for Social Security

KNOW: Social Security's annual surplus nearly evaporated in 2009, according to USA Today, meaning that its trust fund is building up more slowly than anticipated and, when Boomers begin retiring en masse, could run out of money sooner. Meanwhile, Boomers have yet to make the radical lifestyle changes they need to save enough to enjoy a financially secure retirement. DO: Boomers are pessimistic about the future, but they may not be pessimistic enough. Send them the USA Today article and let them ponder the implications for their retirement. Invite them to re-evaluate their long-term financial plans.