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February 22, 2018 at 11:51 AM
While the “sandwich generation” is nothing new, the latest members of this group are facing a unique set of challenges, like more debt, increasing college costs for their kids and parents who are living longer. Based on the findings of Fidelity’s ninth Millionaire Outlook study, 61% of Gen X/Y millionaires are supporting children and/or grandchildren and 20% are supporting parents and/or grandparents. What’s more, nearly seven in 10 are carrying debt[i], adding to their financial juggling act.
This challenge obviously isn’t unique to millionaires — it applies to all levels of wealth. How can advisors provide the most value to these clients? Here are five tips to keep in mind when advising the new sandwich generation:
1. Be focused on the big picture
When clients are juggling many priorities, it’s more important than ever to look at their full financial picture. Approach these investors with a life event management philosophy and work with them to set goals around upcoming life events. How much money do they want to have set aside for their kids’ college tuition, and when will they need that money? When do they hope to retire, and with what kind of lifestyle? What elder care costs are in their future? What are their personal goals besides retirement, such as purchasing a vacation home? Having a clear understanding of those life goals will help you develop an effective plan and add value to your clients’ overall lives.
2. Be assertive about tough topics
Talking about death certainly isn’t easy, but planning for their parents’ passing is a crucial conversation to have with sandwich generation clients. You should also make sure your clients are thinking about their parents potentially outliving their retirement savings. How will they pay for health care and other costs if that happens? Also, talk about what happens after their parents pass away or become unable to make decisions. It’s helpful to have a full understanding of a loved one’s financial picture before that happens.
College decisions can be another sticky, yet important conversation. The average family is on track to save only 29% of the amount of college costs they intend to cover by the time their child graduates high school, according to the Fidelity Investments College Savings Indicator (August 2016). There can be huge differences in cost depending on the type of school, scholarships available and more. Encourage clients to think about what’s best for both their child’s education and the family’s overall finances — some balancing might be in order.
David Canter 