Time to Start Talking

With the economy sputtering, more and more financial advisors are going to see their boomer clients squeezed between the dual financial demands of boomerang kids and aging dependent parents.

While the current economic climate has put a spotlight on the issue, it’s got huge staying power — and may well reshape the financial planning engagement.

As Lisa Kirchenbauer, president of Kirchenbauer Financial Management & Consulting in Arlington, Va., puts it: “Long-term, this is going to continue to be a big issue. Short-term, we’re going to get our first taste of it in real time. Kids may not be able to get jobs right out of school and Mom and Dad may be squeezed because the market is not doing as well — and the boomer client is right in the middle of it.”

Which leads Kirchenbauer, a certified financial planner, to ask this key question: Does the situation require a rethinking of how financial planning is structured?

Not surprisingly, demographics is driving the trend.—

A survey of 1,500 adult children of aging parents by Home Instead Senior Care revealed a number of obstacles that undercut the quality of life for both generations.

Based on the research, the international caregiving firm recommends following “The 40-70 Rule,” — meaning that if you are 40 and your parents are 70, it’s time to start talking about certain senior topics, including financial planning and financial independence.

Among the findings:o Boomers communicate frequently with their senior parents by phone and in person: 35 percent communicate daily and 26 percent every couple of days.o Many boomers would like to know more about their parents’ personal situation so that they can help them, if necessary.o Nearly one-third of boomers say the continuation of the parent/child role is the biggest obstacle to communicating with their parents about difficult topics.o Nearly one-quarter say they wish they were more prepared to talk with their parents about these older adults’ plans for the future.o Boomers whose parents live with them are the least comfortable of all adult children when it comes to discussing issues with their parents such as finances, health, Medicare/Medicaid benefits and driving.

For more information, visit www.4070talk.com.

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With many boomers having delayed childbirth, there’s now an overlap in the period when a child becomes independent and when the care of an aging parent becomes important. Add to that the return to the household of an adult child and it makes for a changed household and financial profile.

It’s so changed, in fact, that a new “life stage” is emerging, according to Larry Cohen, director of Consumer Financial Decisions Group, which is affiliated with SRI Consulting Business Intelligence.

“It’s still in a transition phase, but there’s going to be an increasing overlap,” he says. “Boomers are stuck in the middle and it’s going to get worse for subsequent generations. This is definitely something financial planners need to be sensitive to.”

Already, Cohen’s research shows, over 10 million U.S. households have boomerang children — technically defined as children whom their parents cannot claim as dependents for tax purposes. And that figure doesn’t include boomers who routinely pay bills for children who live outside the home.

“This is just the tip of the iceberg,” Cohen says. “I have no idea how big the iceberg is.”

Consumer Financial Decisions Group research also suggests that financial decision-makers in households with boomerang children are moving away from delegation or self-reliance and want more of a collaborative relationship with their financial advisor.

Also in play: no less than the iconic nest egg.

As Kirchenbauer notes: “What’s the money for? We’re at the point where everyone needs to rethink what is the money really about. It goes to life planning issues: what’s most important in our lives and let’s get the money supporting that as opposed to following traditional ideas. It behooves us as advisors to get these conversations started — because it’s coming. We’re no longer moving in lockstep to the old American dream.”

Survival StrategiesUp until a few years ago, advisor Roseanne Grande never routinely asked new clients whether they had, or expect to have, a financially dependent parent. Today, it’s a critical part of Grande’s financial planning process.

“It’s one of the first questions we ask: Do you have living parents? That’s the conversation opener,” says Grande, managing director of R.W. Rog? & Co. in Bohemia, N.Y. “Basically, I look to see if anybody is dependent on the client’s assets. Are the parents financially able to maintain themselves? Some people have children who’ve come back, or who have emotional or physical problems. You have to see where it all takes you.”

Grande, whose firm has $240 million in assets under management, estimates that one-quarter of her clients are dealing with family dynamics — a boomerang child, an aging parent or both — that could impact their finances.

“I’m noticing it with prospects that come in, too. It’s going to be a really sticky situation,” says Grande, who cared for her own mother at home for 10 years. “A lot of our clients are close to retirement or in retirement and their parents have run out of money. So they have themselves to take care of and now they are trying to help their parents financially. There are also a lot of cases with boomerang kids with grandkids. It’s a totally extended family and you’re in the middle trying to take care of everybody. The whole dynamic of that is pretty crazy.”

For clients in that situation, Grande has suggested they pare back on expenses and perhaps consider moving to a lower-cost state. For clients who are still working, she urges them to overfund their retirement.

“We run our life expectancy to 100 and we are probably going to start running it to 115, believe it or not,” she says. “With medical advances, you can basically be rebuilt. I’m a boomer too and as we age, there are going to be so many of us draining Medicare, health care. One of the things to our advantage is we are young enough today to make changes in these areas now.”