From the February 2006 issue of Investment Advisor • Subscribe!

The Silent Generations

A huge chunk of our nation's wealth is in the hands of baby boomers' parents. Unless these generations start talking to each other about it, we may be in for big trouble

As a baby boomer, I think of my generation as anything but silent. We're notorious for speaking out loud and clear in all directions. All our lives we've been telling our parents exactly how we feel and what we think.

Except for the thing that scares us the most: that they won't always be around and able to take care of us. The older they (and we) get, the harder it is to face the issues that inevitably arise at the end of life, including asking ostensibly mundane questions like whether they're okay financially, as well as profound questions such as what they want us to do with their values and assets when they're gone.

The havoc this avoidance wreaks can harm both generations, although its impact may be most obvious on the adult kids (or "grownchildren," a term I'm fond of). You've probably encountered the fallout in your own practice. The resentment dividing two siblings who learn after their parents' death that one has a free-and-clear inheritance and the other's funds are inexplicably in trust. The rage at a parent who extracts his kids' obedience by threatening to cut them out of his will, then dies intestate. The hurt and confusion of children trying to find out if parents will need financial support, only to be accused of being greedy for an inheritance.

The only way to make progress in these situations is to open up communication. If you can use your professional clout to jump-start the process while both generations can still come to the table, there's hope for an easing of tensions and better resolution.

Why the Generations Don't Talk

Whether you represent older parents or a grownchild, better intergenerational communication is as important to you as it is to your clients. For adult children, an understanding of their parents' situation is a vital part of putting their own financial house in order. How can they plan for retirement without knowing whether or not they may have to support one or both parents? How will they know if they should buy long-term care insurance for the older folks to control their own financial risk?

On the other hand, they (and you) need to know if it's realistic to base life choices on the prospect of a large gift or inheritance. Do they expect their parents to rescue them or make up for childhood deprivation?

For parents, communication can sometimes head off financial disaster when they don't have enough to live on. Beyond that, it offers an opportunity to develop warmer, more open relationships with their grownchildren. It will also give them greater peace of mind to know that the kids are all right-- that everyone is on board with (or at least apprised of) their decisions and their desired legacy.

Why Kids Clam Up

Stereotypically, aging parents are reluctant to divulge their finances and shy away from matters relating to their mortality. However, recent research shows that many older folks are more at ease discussing twilight-of-life issues than their kids may think.

According to a 2005 survey by The Hartford, 76% of parents said they were comfortable talking about estate arrangements with their adult children. By contrast, a mere 45% of boomers felt at ease discussing this. So the responsibility for failing to communicate may well lie with Junior and Sis, not Mom and Dad.

Why are so many grownchildren conflicted, resistant, or downright fearful about bringing up these important topics? In my experience, emotions like these frequently come into play:

Denial. Some boomers resist growing up. (Not any of us, of course!) Many more hate to admit that they're already grown up or that their parents have aged, too, and may soon die.

Avoidance. Some "money avoider" children tell themselves that an older or more financially savvy sibling should deal with the matter. Others pass the buck to sibs thought to be closer to Mom or Dad. The Hartford research reported that "only children" were more likely than kids with siblings to be conversant with their parents' finances. This makes sense: an only child knows there isn't anyone else to step up to the plate, and parents don't have to worry about appearing to favor one child over another.

Financial fears. Younger people struggling to achieve financial well-being can feel overwhelmed by the possibility of having to support their parents as well. They may feel that if they ignore the subject, the problem won't materialize.

Role conflict. It's human nature to dread that our parents may become emotionally and financially dependent on us. We want them to be there for us forever. If our relationship with them has been flawed, we hope that before it's too late they will give us the unselfish love, nurturing, and support we needed and never got. Keeping these turbulent feelings hidden is safer than confronting our parents' imperfections--and our own.

Why Parents Keep Mum

Financial planner Mary Malgoire, who heads The Family Firm in Bethesda, Maryland, cites half a dozen common reasons for parental reluctance to discuss or share money:

  • They think they may need it themselves.
  • They want the children to make it on their own.
  • Talking about money is "not done" in the family.
  • They are embarrassed (usually by having saved too little).
  • They don't want to be told what to do.
  • They fear finding out that the kids are greedy.

When Mary has parents as clients, sometimes part of her job is complying with their wishes to keep the kids at bay.

She points out, however, that it's important to prevent parental silence from producing devastating results. For example, I heard the sad story of a grownchild who lived on distributions from a family trust with no understanding of how it worked. When poor investments caused the funds to begin drying up, she came to a planner in panic. At that point, there was no way to avoid the consequences. Better upfront communication by the parents (or their advisor) could have saved her from having to take the kids out of private school, move to a smaller house, and go back to work to make ends meet.

Overcoming Obstacles

Advisors can play a crucial role in helping parents to think through the fears and concerns that keep them from sharing financial information. Some of these worries may truly apply to their kids, while others are rooted in money messages from childhood ("Money corrupts," "Talking about money is tacky," "All kids are inherently greedy"). It's essential to get these old beliefs out in the open before you will have any luck persuading the parents to initiate a dialogue with their children.

Sometimes more charged emotions such as resentment, anxiety, or shame need to be addressed before an intergenerational dialogue can begin. Consider teaming up with a therapist, counselor, or coach to facilitate these tricky situations.

For example, Ted Klontz, one of the first to blend psychotherapy with financial planning, tells of an elderly couple of modest means who couldn't let their kids grow up. Overcome with guilt about not having been better parents in earlier years, the couple kept sneaking money to their now-adult children without admitting it to each other. Thanks to their handouts, the kids hadn't held jobs for years. After working with Ted and financial planner Rick Kahler of Kahler Financial Group in Rapid City, South Dakota, the clients were able to stop this overfeeding, which improved their own financial well-being while helping their grownchildren become more productive and personally fulfilled. (For more examples, see The Financial Wisdom of Ebenezer Scrooge (Health Communications, Inc., 2006), which Ted and Rick wrote with Ted's son, psychologist Brad Klontz.)

Your efforts to educate a client can also be the first step in mending family bonds. Peg Downey, an advisor who is a partner in Money Plans in Silver Spring, Maryland, tells about a client who was bitterly disappointed when her parents gave the family-owned company to her brother. The lump-sum payment she received made her feel slighted and bought off. Once Peg understood these concerns, she explained that when one child is taking over a business, it is normal and equitable to compensate other sibling(s) with the cash equivalent of the business's value.

With a better perspective on the situation, the client felt more fairly treated. This led to an open discussion with other family members, improving the quality of their relationships.

Getting All Parties Talking

If it's the parents who are hesitant to talk, Mary Malgoire suggests that a grownchild approach them this way: "My financial advisor has asked if there is a chance you may need some financial support later in your life. I would like to prepare for that by setting something aside in case it happens. Would you be willing to share this information, either with my advisor or with me?"

Ideally, parents will discuss their situation with the children as well as with you. This enables you to learn and share, and possibly heal family rifts as well.

If the older folks are headed for financial difficulty, embarrassment and shame may make them even more reluctant to level with their kids. However, the sooner the whole family can get together to strategize solutions, the better. You may be able to help them find an answer (a reverse mortgage, for example, or a private annuity) that both generations can accept.

If the kids are the ones with cold feet, you can initiate the communication process by inviting them to your office to discuss their parents' wishes and preferences. Coming from you, this invitation may be less emotionally loaded and have more professional weight than if the parents had sent it. Your office is also a neutral place, free of memories that might pollute communication in the kids' or parents' home. Ideally, these factors will work together to make the grownchildren feel less able to refuse the request.

You might mention The Hartford survey findings when they arrive, to let them know they're not alone if they feel awkward. Then sum up the ways this discussion can benefit them as well as their parents.

Introducing a Hidden Agenda

Sometimes a parent may appear to be investing unwisely, having trouble paying bills, or in the unhealthy grip of a neighbor or so-called advisor. How should you handle kids' requests for help in getting their folks to change the way they manage money?

Since older people are often highly sensitive to any suggestion of impaired functioning (see "Mom, Dad, Let's Talk" sidebar), I would suggest a soft, gentle approach rather than confrontation. You might start by inviting the parents to contribute their experience and knowhow in helping you develop a financial plan for their offspring.

In situations like this, some planners prefer to tactfully usher the kids from the room and have a private conversation with the older folks. Once the discussion is underway, you may be able to win their trust and elicit details of their own money management that will indicate whether a change is really necessary. Sometimes the children's concerns are legitimate, while at other times you'll find they have been overblown by fear.

A conference in your office can also be a ploy to get Mom and Dad to pay for the grandkids' education or help in buying a house--not that there's anything wrong with that! If your clients want to explore getting an advance on their inheritance, you can initiate a parental consultation without having to spill the beans upfront. Phrase the invitation in terms like this: "Your son/daughter, my financial planning client, suggested that you might be willing to help us strategize ways to reach their longer-term goals. Would you be able to join us in my office next Tuesday or Wednesday?"

After the meeting starts, it may be easy to discover whether or not the parents want to help their kids now. If they have been assuming it's crucial to leave as large an estate as possible, try to educate them about the advantages of giving away some of those assets now. A current gift not only shrinks their potential estate tax liability, but also may be more appreciated while the younger generation is still struggling for financial security.

Speaking of estates, it's not unusual to encounter older parents who are denying themselves luxuries (or even necessities) in order to leave a larger inheritance. As in the situation Ted Klontz cited, this overgiving may be fueled by unresolved guilt at not having been there earlier for their kids. Encourage these parents to forgive themselves, apologize to their grownchildren, and possibly ask for the kids' forgiveness, too.

Getting the Generations Together

Overall, outcomes tend to be good when the whole family is involved in an intergenerational get-together. Such gatherings, reports Malgoire, can have very powerful results, especially with the in-laws.

When you facilitate these meetings, be sure both generations have an opportunity to share their thoughts, feelings, and desires. You may need to occasionally interrupt information-sharing monologues to make sure everyone is still on board and paying attention.

Ted Klontz tells about a family meeting called by a client couple to update their grownchildren. The parents talked about their financial situation and wishes for a long time. A long, long time. The two kids' eyes began to glaze over. One finally left the office without a word. When Ted suggested asking the children about their own money preferences, the parents were taken aback. Apparently, the idea of a dialogue had never occurred to them.

Talking Through Their Hats?

In another extensive U.S. survey last year done by Allianz Group, most parents and grownchildren said they were "highly confident" talking about legacy and inheritance issues. However, less than a third had actually discussed such topics as values and life lessons, wishes to be fulfilled, personal possessions of emotional value, or financial assets and real estate. A good fifth of the baby boomers surveyed hadn't addressed any of these issues with their parents.

If we probed the conversations that did take place, I suspect the amount left unshared would dwarf the little that actually was said. How many other families resemble the one where the father left most of his wealth to a family foundation, stating in his will: "I can't get my children to work together while I'm alive -- but if they want any say in where the money goes, they'll have to work together after I'm dead."

As more and more baby boomers are faced with the need to broach ticklish matters with their aging parents, you might consider developing special expertise in this area. Gather and share good articles on intergenerational dialogue. Identify therapeutic professionals experienced in money conflict resolution who can partner with you, or serve as a resource for family members needing extra counseling. By all means, remind your boomer clients to "walk their talk" by discussing their financial plans with their own offspring as soon as the kids are mature enough.

With your understanding and support, there's hope that more parents and grownchildren will speak the whole truth to each other about legacies that can shape their family's course in the future. When that happens, the silence of the generations will truly start to become a thing of the past.

Olivia Mellan, a speaker, coach, and business consultant, is the author with Sherry Christie of The Advisor's Guide to Money Psychology, available through www.investmentadvisor.com. You can e-mail Olivia at om@moneyharmony.com.

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