It is not at all uncommon to work for someone running a startup company these days who looks little older than a college senior. In many cases, that’s because they are only a little older than a college senior. The traditional hierarchy of younger people working for older people has flip-flopped.
The rise of entrepreneurship has created this class of young business leaders. This group plus other young professionals—the 53 million Americans born between 1981 and 1992—constitutes one-sixth of the U.S. population. And nearly one-fifth of them (15 million individuals) enjoy incomes of more than $100,000 a year, according to the 2014 Ipsos Affluent Survey USA, and reported in a recent Chubb whitepaper.
Such strivers should be commended for their success, but many are not adequately protecting their present and future well-being. One reason: They are so absorbed in their careers that they’re unmindful of the need to protect themselves and their accumulating wealth from risk. In addition, more than one-third (36%) of this cohort still live at home with their parents and may also be exposing their high-net-wealth parents to risks.
I recently discussed the perils with Taylor Cox, a partner at Cox Insurance Associates, Inc., a Minneapolis-based insurance advisor to a high-net-wealth clientele. Taylor agreed that many wealthy young professionals enjoy the same feelings of invincibility that we all felt at that age, except that it’s a much more complex society today, and they may have far more to lose financially.
“They’re successful and confident and rather oblivious of risk, which is not a big thing for them, generally speaking,” Taylor said. “Unfortunately, this kind of thinking tends to breed careless behavior, so it’s my job to instill some risk mitigation strategies that protect their lifestyle.”
No one is painting these individuals with such one-size-fits-all foregone conclusions. Nevertheless, several surveys and studies paint a rising cause for alarm. Together, this research suggests that many young, upwardly mobile people are not giving due consideration to the risks of personal harm, much less the potential loss of their accrued and growing wealth.
Let’s start with the risks brought about by the growing use of digital technology, an industry that minted many of today’s young millionaires, much like investment banking did a generation ago.
Many young adults use digital tools with little or no thought given the potential perils, possibly blinded by their intimacy with the technology. Yet they make up the largest group of complainants to governmental authorities about identity theft. If they are known to be financially successful, that often puts a bulls-eye on their backs.
Young adults also are frequent users of social media. These practices put them at greater risk of a defamation lawsuit for a thoughtless or intemperate statement made online. Sixty percent of young adults also rate the quality of products, services and past employers on such sites like Yelp and Glassdoor.
If the comments are negative, carelessly written and picked up by a search engine, this may spring a lawsuit, not to mention damage the individual’s personal and business reputation. Many service providers like contractors, restaurants and real estate management companies have sued consumers for posting negative reviews.
Young adults face many other types of litigation. Unfortunately, the vast majority fail to procure sufficient excess liability coverage absorbing the related financial losses, leaving them exposed to damage awards that can direly affect their present and future wealth.