Welcome to Financial Advisor IQ

Show Millennials How to Open Up to Boomers

By Chris Latham March 30, 2015

Millennials and their baby boomer parents often experience friction over money, affecting how financial advisors interact with each generation. Since millennials are now old enough to become clients in their own right, advisors should learn how to help them express their financial concerns to their elders, experts say. This might be a culture shock for advisors accustomed to pushing the parents’ party line.

Conversations between younger and older family members can become less uncomfortable when an impartial third party is present, according to Sharon Klein of Wilmington Trust. She is managing director of family-office services and wealth strategies for the Delaware-based firm, which oversees more than $80 billion. Advisors can join the family conversation and offer solutions for both sides. “Opening the dialogue is the most important part of the process,” she says. “But it’s not a good idea to wait for an emergency.”

With this in mind, advisors should tell millennials who’ve been kept in the dark about family finances they shouldn’t expect the best response if they approach a parent about a potential inheritance while the elder is hospitalized. Even outside a crisis situation, honest questions about estate planning could come off as threatening, Klein says, since the elder might feel a loss of control. Better for millennials to approach the topic with tact and sensitivity, asking during a calm time whether their boomer parents have thought about wealth transfer.

Conversely, advisors should encourage parents to talk to their adult children about things like sustainable spending before heirs start whittling away their fortune, according to Klein. She defines sustainable spending as ensuring a portfolio continues to grow over time after considering inflation, taxes and budgeting for personal expenses. Sustainable spending influences a family’s investment strategy, which determines the projected growth of assets in the portfolio. “I’m a big believer in equipping the family members with skills that facilitate the transition of wealth,” Klein says. “When kids are not exposed to the wealth, that’s when you see them develop bad spending habits.”

Sharon Klein

Advisors can use philanthropic strategies as a way to bring adult children and their parents together, while honoring the values of the family, Klein says. Trusts, foundations and other accounts can be structured to require relatives to discuss which causes to support. In sharing their thoughts about particular charities, relatives get to know one another better. After facilitating these initial conversations, advisors should bring the family back together periodically to manage the charitable giving. This includes determining the best investment strategy for philanthropic assets.

Letting Go

Financial drama isn’t isolated to families wealthy enough to have charitable trusts. Mass-affluent parents especially need to know when to let go of adult children’s finances, according to an AARP blog post. Indulging adult children who request financial help can jeopardize parents’ retirement. Graduate school, weddings and first homes may add up to hundreds of thousands of dollars. Advisors can suggest to parents who feel compelled to help out that they should leave their retirement accounts alone. Rather, they should use lines of credit attached to home equity or non-essential investment assets, and make their adult children responsible for payments, the blog says.

Generally speaking, millennials who can support themselves are open to financial guidance, particularly the kind that features a road map for their future, according to a recent article in the Financial Times. They’re also more interested than older workers in diversification and alternative investments, the article reports. However, they want to receive financial education in ways that are easy to digest — and, if possible, entertaining.

Advisors who can accomplish that stand to reap huge rewards — especially if they also happen to serve these millennials’ boomer parents. During the next few decades, millennials will receive trillions in assets as boomers pass away. Yet most children dump their parents’ advisor upon inheriting the family wealth. That’s all the more reason for advisors to prove their worth now to millennials by facilitating productive financial conversations with their boomer parents.