Next Generation Next Destination

GENERATIONS & MONEY TALKS

Whatever generation you belong to, whatever stage of your business as a trusted advisor, you are more likely to encounter inter-generational challenges than ever in the past. That’s because external forces and formative influences have resulted in greater differences in how the generations view money, lifestyle, investing, philanthropy and relationships.

Money may not be the root of all evil, but it often leads to the primal “fight or flight” response.

Talks about money are often the hardest discussions among work colleagues, family members, friends and even in instances of our own self-talk. It’s an emotional thing tied up with perceptions of our self-worth or somebody else’s. For some people money is more important as a scorecard than the actual value of what they can do with the money. In families it’s tied to how much one is loved compared with others 

So it’s easy to see why money talks are avoided, even before taking such huge steps as marriage, living together and having children. Yet it’s been documented that relationships turn out happier when money conversations do take place before major decisions.

As I work with financial services professionals, I witness the tensions that can occur over money. Advisors often find it difficult to get their clients to talk with family members or business associates about money in order to do estate planning and decide how they would like to donate money philanthropically. And advisor teams may have their own money conflicts when they neglect to discuss in advance their attitudes, expectations, transitioning and exit strategies.

 So, yes, money discussions can be volatile, but it’s worse to avoid them. Instead:

 *    Establish a shared language about money.

 *    Identify and avoid “trigger words.”

 *    Understand what key words connote for each party.

 *    Identify and be aware of your own “trigger words.”

This last point may be the most important for anyone trying to facilitate the discussion, whether among clients or family.

 Phyllia Weiss Haserot    www.pdcounsel.com

Financial Planning: MultiGenerational Living Is Working

Gen Y/Millennials are contributing at home as they save, not simply living on parental support. A Pew Research Center survey of over 2,000 adults in the U.S. in early 2012 yielded these statistics:

• Over 20% of 25-34 year olds live in multigenerational households, nearly double the percentage in 1980 (the more independent Boomer and Gen X generations).
• 24% of young adults 18-24moved back in with their parents in the last few years owing to economic conditions.
• Even more, 41% of adults 25-29, live with or moved back in with their parents.
• Of adults 30-34, 17% did the same.

And both parents and children report they are positive, neutral or satisfied with the arrangement.

It’s not totally a parental handout.  Survey findings indicated that 75% of the young adult children contribute to household expenses, e.g., groceries and utility bills, and 35% say they pay rent.  96% say they do chores around the house. The report didn’t specify how long the arrangements have continued and whether there will be a tipping point at which either side or both will no longer feel positive about the arrangements.

Financial planners advise that a plan be developed and agreed to by both parents and live-in young adults, including charging rent, so expectations are clear and there be an exit strategy and parents don’t jeopardize their retirement savings.

This experience is probably working because Gen Y/Millennials and their parents, to generalize, have closer relationships than any parent-child relationship in history.  That is a positive thing for the most part, but when possible, adult children should build independent and self-sufficient lives.

How long do you think the current trend will last? How does this impact work attitudes positively or negatively?

 

 

 

 

 

BROAD IMPACT OF STUDENT/EDUCATION DEBT

Not only is the amount of student debt staggering, but also it continues to grow significantly. Increasing 5% from 2009, students graduating in 2010 had an average of $25,250 in student loan debt, as has been reported widely.

As stated in the Y Pulse newsletter  (11/14/11), “Students have been raised to believe that having a college degree improves their chances of getting a job, but graduating in a poor economy, a degree doesn’t guarantee employment. They’re facing a catch-22. What’s more, when they have a hard time finding work, some are going back to graduate school, hoping that biding their time and improving their knowledge will result in a job. But meanwhile, they’re racking up more debt in school. In many cases, they’ll enter the ‘real world’ buried in debt. During the years they would normally be setting up their households right after graduation, they’ll instead be living at home trying to save money, shifting the typical consumer cycle by several years….”

Economists have been weighing in on how this affects the broader economy. And it brings many questions to my mind.

• Of course, there are some young graduates whose parents were able to pay the education bill and are not weighed down by debt. How are they affected by the debt albatross hanging on their classmates?

• How do you think the economics of firms would change if education debt/student debt were not a serious problem?

-       Would organizations be able to reduce entry-level salaries and compete on the basis of good and plentiful training offerings?

-       Would new employees be willing to trade higher salaries for more training and less oppressive work time pressures?

-       Would the U.S. be more competitive with other countries?

-       Would corporate social responsibility increase

• How much are Gen Y/Millennials’ decisions about career choice, amount of education and lifestyle (whether they can afford the one they choose or not) being affected by student debt?

Please think about these questions and comment on this important issue. It deserves a healthy dialogue.

Phyllis Weiss Haserot   www.pdcounsel.com

 

PROFESSIONAL BUSINESS CHECK-IN

Many professionals focus on their clients’ goals more than they reflect and plan to reach their own goals – or even identify them. At least twice a year, it’s important to check in with yourself to ensure you are heading in your desired direction.

You can begin with these questions:

• How would you honestly evaluate the status of your business now?
• What role do you want to play in your business during the next 3 years? Is that role different than in the past?
• Over the next 3 years, what do you, personally, want to achieve?
• What are your financial goals short-term and long-term?
• How will you achieve them?  Consider forecast trends in your marketplace.
• Is it time to begin thinking about and planning your personal exit strategy from your business?

For some more thoughts on what to reflect on as you develop your goals, check out Jeri Quinn’s blog post http://www.drivingir.com/understand-your-service-before-defining-your-goals

Start now and make a habit of reflecting on and tracking your own goals.

 Phyllis Weiss Haserot

ECONOMIC REASONS NOW AS IMPORTANT AS MENTAL ENGAGEMENT IN RETIREMENT PLANS

 After two years of economic misery, the working population of the U.S. ages 18-66 now cites financial need or expectation of need as important as mental stimulation for planning to work beyond the age of Social Security eligibility. A Sun Life Financial survey by telephone in September 2010 found that 52% of respondents expect to work at least three years longer than the eligibility age.  Sun Life calls this annual survey the “Unretirement Index.” Unretirement is defined as working at least 20 hours a week after reaching the Social Security full eligibility age (which creeps up from 65 for Traditionalists to 66 and 67 for Boomers).The overall index score reflects how respondents feel about five factors: the economy, personal finances, health, government benefits and employee benefits.

In 2008 and 2009 Sun Life surveys, the most prevalent reason given by respondents for working past age 67 was “to stay mentally engaged.” In 2010, an equal percentage answered “to earn enough money to live well.”

It will be interesting to see if better economic conditions, including a more stable financial markets environment, cause a shift back. Right now it doesn’t seem that the “simpler living” movement is taking hold, at least as a voluntary mind shift.

Phyllis Weiss Haserot     www.pdcounsel.com

TRANSITIONING: A HOT TOPIC AT THE ABA

Two hot topics among lawyers over 50 at the American Bar Association Annual Meeting in San Francisco August 5-8 were succession planning and anticipating and planning for what comes next for midlifers (defined as age 50-70).  Many Boomers have been putting off planning or even visioning of their next phase. A large percentage (40-60%) want to keep going either as lawyers or in some other capacity after age 65 or 70.

The "Lawyers at Midlife: Planning for and Living the Rest of Your Life" presentation on Sunday morning drew 40 people at 8:30am. The presentation by Mike Long, a former practicing lawyer and for many years now an attorney counselor at the Oregon Attorney Assistance Program in Portland, was a whirlwind tour of the financial, job satisfaction, health/longevity and relationship factors people in midlife should be seriously considering and planning for. The presentation focused on the individual's transition and did not address the institutional (firm or organization) factors of client retention/transitions and knowledge transfer. The audience was engaged, and many admitted they were quite behind in their planning for the inevitable.

Phyllis Weiss Haserot   www.pdcounsel.com

THE GREAT GENERITIVITY DEBATE

 I want to call your attention to an interesting debate on the between Marc Freedman, founder of Civic Ventures, and David Brooks of The New York Times.

In a column published February 1, Brooks proposes reversing public policies that he says rob the young to serve the old and take from them funding, freedom and opportunity, saying, "It now seems clear that the only way the U.S. is going to avoid an economic crisis is if the oldsters take it upon themselves to arise and force change." He calls for a "generativity revolution" of millions of people demanding changes in health care spending and the retirement age to make life better for their grandchildren.

In a piece published today on The Huffington Post, Freedman says "the real generativity revolution is well under way. And with the help of smart new policies, this movement of forward-looking baby boomers might actually succeed." He writes, "It's increasingly clear that these older workers aren't competing with younger people; they are meeting demands for talent that will only grow as the economy recovers."

Freedman argues, "With 10,000 baby boomers turning 60 every day, it's time for public policies that honor their aspiration to leave the world a better place and harness their talent and energy for the long haul."

You can read David Brooks' column here:
http://www.nytimes.com/2010/02/02/opinion/02brooks.html
Marc Freedman's piece is here:
http://www.huffingtonpost.com/marc-freedman/generativity-revolution_b_447774.html

Comments from both points of view are welcome on Encore.org, as well as right here. Join the discussion  at http://www.encore.org/news/marc-freedman

What are your thoughts? How do we prevent generational resentments and warfare?

WILL THIS BE AN UPBEAT DECADE FOR YOU?

According to the Herman Trend Report: Generationally, the most optimistic group is young people, ages 18 to 29, 65 percent of whom feel positively about the next decade. On the negative side, people between the ages of 50 and 64 are the most pessimistic about the 2010s---42 percent think things will be worse. This statistic compares with 30 percent of people under 50 and just 26 percent of those ages 65 and older. In both November and December, The Conference Board Consumer Confidence Index®, rose. The Index now stands at 52.9, up from 50.6 in November. The Expectations Index increased to 75.6 from 70.3 last month. Expectations for the short-term future increased to the highest level in two years (Index 75.8, Dec. 2007). A more optimistic outlook for business and labor market conditions was the driving force behind the increase in the Expectations Index. Is Gen Y overly optimistic? Are Boomers too pessimistic? What do you think? Optimistically, Phyllis Weiss Haserot www.pdcounsel.com

HOW ATTITUDES TOWARD ECONOMIC RECOVERY INFLUENCE BUSINESS TRANSITIONING

A new MetLife survey says the severe economic downturn has revised the retirement mindset for all generations. Better late than never (?) all generations regret their financial behavior pre-crisis. Amassing too much credit card or other debt was most prevalent among Gen Xers (54%); and Boomers more than others (22% to 17% for all Americans) regret insufficient diversification of assets.

Gen Yers expect the economic recovery to come sooner than other generations do. As a group, they expect the economic recovery for the country (29%) as well as for themselves (49%)  to come in less than 2 years, according to the survey. Older Boomers (over age 55) are the most pessimistic about their own financial recovery, probably because they have less time to make up for recent losses. 38% of younger Boomers believe their personal financial recovery will take at least 10 years.

These attitudes haven't translated into much action so far. 44% haven't done anything yet to change their retirement/investment behavior, probably owing to both inertia and confusion. 54% of Gen Yers haven't made any changes, and 45% said the financial crisis had little or no impact on them. Is this undue optimism, since job loss is high, along with salary cut-backs, and not showing signs of turning around soon? Or is it not knowing better, or the influence of an upbringing which told them they would be successful whatever the situation?

In the workplace, will the behavior and attitudes found in the survey mean an increasing divergence in opinion on how a business should make its investments in technology, training, risk management, etc.? Protective strategies vs. future investment at higher risk aiming at higher gains?

Will these differences make it more difficult to achieve smooth transitions of practices and clients from one generation to another? As individuals, according to the study, are increasingly realizing they need and are turning to financial advisers, will firms turn to advisers to help them achieve more harmonious, win-win transitioning that will benefit the firm overall, those who are leaving, and those who continue on?

Your thoughts?

Phyllis Weiss Haserot      www.pdcounsel.com

TRANSITIONING & BEHAVIORAL ECONOMICS

I attended a fascinating presentation and discussion today on how we make decisions, particularly ones that affect us financially, sponsored by Citron Cooperman CPAs. The presenters were Delia Marshall and Yvette Wynn from BNY Mellon Wealth Management. Behavioral economics is growing in interest and credibility. Related are neuroeconomics and neuro-marketing based on scientific studies of brain function which have become possible with the medical technology existing today.

Marshall spoke about the studies which are revolutionizing our thinking and proving that decision-making is more emotional than rational, governed by the biological "fight or flight" response. Most people may be biologically wired not to want to delay gratification. Brain imaging results are being integrated into advertising.

This means we have to make extra efforts to be mindful and reflective before making decisions that may go against our best interests, especially financially. Emotions can be very good things, of course. In decision-making we need to be aware of the role of emotions and what we are feeling at the time so that we can make reasoned decisions.

Among the resources Marshall recommneded to learn more on these topics are: Jason Zweig's book "Your Money & Your Brain" (Simon & Shuster 2007) and "Nudge: Improving Decisions About Health, Wealth and Happiness by Richard Thaler, and Cass Sunstein (Yale University Press 2008).

Accepting this brain science.and realizing what is going on in our brains we can choose to be purposefullyly reflective rather than reflexive at times that really matter - when it comes to retirement and transitioning planning, for example. Be aware of  ways the fear of loss of professional identity (in the "Personal Bucket") or no longer feeling as valued as before by colleagues is influencing decisions about transitioning clients to and mentoring younger colleagues.. Avoid having reflexive behavior hinder getting what is really important to you and your legacy.

Phyllis Weiss Haserot     www.pdcounsel.com