Chapter 5
The Baby Boomers
The Baby Boomers are the 75 million Americans born between 1946 and 19641 or 28 percent of today’s Americans. Whether it was their sheer size or how the world responded to them, Baby Boomers always understood their influence and they exercised it to their benefit.
Born between 1946 and 1964, the Baby Boomers get their name from the boom in the birthrate following World War II.2 As these 75 million individuals grew up, they singlehandedly reshaped how we experienced and viewed life and society. Caught in the middle of some of the most turbulent and important moments in our history, they grew up idealistic, holding to these principles and using them to reshape how we work, how we consume and purchase. Today, they are also changing the way we age—or if we age at all!
This generation was promised the American Dream and they relentlessly pursued it. As a result, they are often viewed or experienced on two ends of a spectrum—selfish, materialistic, and ambitious, or idealistic, forever young, and collaborative. But most of all, they are optimistic, and believe without a doubt that there is no problem or challenge that cannot be solved or accomplished without hard work and a good attitude.
The Baby Boomers singlehandedly changed the way businesses operate, their preferences and values heavily influencing the marketing, sales, and service strategies of many businesses to meet their needs, appeal to their preferences, and win their business.
The financial services industry is no exception. From mahogany desks, credentials, and degrees on display to hierarchical organizations and firm handshakes, we crafted a client experience around the Baby Boomer client. If we were to describe it, we might say built around a male archetype. It was designed to appeal to and service the face of wealth our country is most familiar with: one that tended to be the male head of household who was most often out earning the wealth and deciding where and how it might be invested.
Generation Smarts: Working with Baby Boomers
The Baby Boomers are the wealthiest generation of consumers in American history.3 The U.S. 50-plus population spends $3.2 trillion annually. That is more than the GDP of nations such as Italy, Russia, the United Kingdom, Brazil, and France!4
Boomers far exceed younger investors when it comes to holding financial investments by more than 50 percent over investors aged 18 to 49—and the investments that they do hold are valued 197 percent greater than those of younger investors.5
With so much emphasis on the next generation of investors, many advisors begin to wonder if the Boomers will still have the same clout and meaning in their business. Make no mistake: This generation is just getting started.
This demographic is living longer than any other generation in our history.6 Our treasured industry colleague and friend, Cam Marston, is an expert on the topic of generational savviness. Marston often jokes that the Boomers are in cahoots with the pharmaceutical companies to stay alive indefinitely, and we are beginning to think he is on to something!
This “refusing to age” demographic is wiping away stereotypes and images in our mind of old age. Based on how well they’re living and their continued good prospects, some researchers have called to redefine old age to be as having 15 or fewer years left to live. This means for the Baby Boomer generation, they will still be middle aged until their 74th year.7
It seems they’ve not only figured out a way to live longer, but to live really well while they’re doing it. They are youthful in every sense and marketers capitalize on this. The stock photography now used to engage them on websites or in brochures is full of youthful, active, fulfilled adults—no one is sitting on a couch watching life go by.
Boomers continue to occupy the majority of senior leadership and management positions at work and are at or near their earning peak.8 While the oldest Boomers may just be beginning to retire, the youngest are in their late 40s or early 50s and face many of the same lifestyle challenges as Generation X—raising children, working hard, building wealth—most Boomers are still making plans and have a lot of life left to live. In other words, they are still very good and relevant clients for most advisory firms.
The demographers in our industry have divided the Boomer generation into two groups: Early Boomers, born 1946–1955, and Trailing Boomers, born 1956-64.9
Marston’s research concludes that while similar experiences and attitudes informed both groups, they are at very different life stages with different financial priorities, and advisors need to understand the distinction.
The Early Boomers are close to or have entered retirement. They have grown children and they are in transition. They are adjusting their lifestyles: selling primary residences, contemplating second homes and warm locations, and looking to their advisor for confidence that they can retire comfortably, handle unexpected expenses, and make their savings last for the 30-plus years many of them will spend in retirement.
Trailing Boomers may more closely resemble the generation who follows them, Generation X (more about this cohort soon). Many are in their prime earning years and have no plans to stop working: some because they may have children still at home and many obligations still to come; others may have experienced the burn of the financial crisis and working longer is a necessity.
Other Trailing Boomers are extending their retirement horizon for more optimistic reasons, including how much they enjoy their career and the contributions they are making at work or in their communities. This group is a spirited group. If they have any plan for life after work, it’s to continue to reinvent themselves and find many new ways to pursue their ideals. Keep these points in mind when engaging with a client of the Baby Boomer generation.
Invest in Building Relationships—the Old-Fashioned Way
Similar to the Mature generation, the Baby Boomer cohort will feel appreciated and valued by you in proportion to the effort you put into the relationship. This generation values face time (the real thing, not the app) and tends to prefer to do business and have intimate conversations in person.
When compared to their generation peer groups, a recent study found that Generation X and Y’s preference for meetings at the advisor’s office was half that of Baby Boomers!10 Baby Boomers are your most likely client to make time for and appreciate spending social time together.
Depending on personal preferences, of any of the cohorts, this is the group that may be the most likely to suggest ways of combining business and pleasure. It may be on the golf course or over lunch and meetings in your or their office. The place is most often trumped by their desire to work together and communicate face to face.
Many advisors who also happen to be a part of the Boomer generation may find that working with these clients is among of their most pleasurable relationships to manage. There is often an instant sense of compatibility. Advisor and client quickly relate to the life phase the other is in; they tend to have similar goals and challenges, whether it relates to saving enough or being caught in the challenges of the sandwich generation (caring for children and parents at the same time).
When there is so much overlap in life’s moments, there can be a sense of understanding that strengthens the relationship and makes building trust easier. However, when younger advisors are engaged and asked to manage a relationship with a Baby Boomer client, they can struggle in many ways to find those points of connection. One area in particular is around communication preferences.
Here are two suggestions to ease this strain.
Provide Training for Your Team
While we like to avoid generalizations, there are some tendencies that resonate more with some generations than others and these have been documented by many researchers. If you’re unsure where to begin, a subject matter expert can assist you. Cam Marston, for example, provides specialized training. He is also the author of a workbook and online course, The Gen-Savvy Financial Advisor, which can provide quick insights that make a meaningful impact on your client experience. You can learn more about Cam’s resources here: www.generationalinsights.com
A few tips to get you started:
- Baby Boomers are not afraid to question authority, so do not be surprised if this generation presses you to explain more or for details to proposals or in general during conversation. To avoid feeling like you are defending your ideas and recommendations, give your Baby Boomer clients choices and more choices, to demonstrate your flexibility. Ask them to weigh in on the options provided. Remember that this generation likes to work as a team. They will appreciate receiving options and the discussion that ensues as creating the environment of collaboration and teamwork that they thrive in.
- This generation was rewarded for and celebrates their achievements. Baby Boomers love a rich history, and your story of hard work, diplomas, and collected accolades will resonate with them. Develop a corporate narrative for your firm, present your firm’s history and experience colorfully, and then pivot and frame it in a way that helps your Boomer clients see the big picture and their future. Be sure to take the time to pause and underscore how your proposal will help them achieve and celebrate their goals.
- Embrace paradoxes. For sure, there is a large part of the Baby Boomers who are intimidated by and avoid current high technology. Yet, the Baby Boomer generation spends more on technology than any other generation.11 Do not be afraid to try social media, particularly Facebook and LinkedIn, to reach this group. Most of them have a smartphone and a tablet and many are fluent in using them to communicate.
Never Assume
The most sophisticated client communication programs have a systematic way to understand, document, and adapt to a client’s communication preferences. It seems innocuous to call when your client might really prefer e-mail, yet, over time these small frictions can really negatively affect the way people relate to each other, how welcome the communications and interactions are, and ultimately become a real point of dissatisfaction in a relationship—no matter how positive the other interactions.
To avoid these unnecessary frustrations, many of the advisors we work with automatically ask clients their communication process during the onboarding process and regularly throughout the relationship.
Pershing’s annual Study of Advisor Success in 201412 noted that in addition to wanting to have a say in how they are contacted, investors also wanted a say in the frequency of communications.
Consistent and predictable communications can help build the foundation of trust between you and your clients. The more frequent and tailored communications between you and your client, the more your clients can understand what to expect and in general, the more satisfied your clients will feel. It’s also worth noting that the study found that too many advisors have not yet invested in or developed a client-driven communications strategy. This is a missed opportunity. It is critical for advisors to understand how, where, and when current and potential clients prefer to communicate, as these seemingly small irritations can add up to be big “dissatisfiers” in a relationship. They are also the nuanced pain points that open the door to your client taking a call from another advisor.
We work with a large firm who, for a long time, had as one of their strong points their meeting follow-up. In each quarterly touch point, the advisor and his team would document the actions the client should do in the time between meetings. It could be things like talk to their attorney and finalize a trust or shop for more insurance. No matter what the issues were, the checklists and the client service representative checking in and nudging the next steps along was meaningful to many of this advisors’ clients.
For a period of time, this advisor experienced some heavy turnover among some of his key account management and junior advisory staff. These staffers were the people who would ensure that these valuable communications and follow-ups happened. They misunderstood the weight his clients placed on the follow-up calls and the help they represented. The advisor stopped these communications between meetings while he managed with fewer administrative and junior staff.
The advisor thought any dissatisfaction his clients might experience as a result of the turnover was more about what they experienced during the in-office meetings and having a consistent contact person than the contact the clients placed on the communications between meetings. This advisor often extended himself to be present at the meetings and show his commitment to the relationship, but he completely missed that the driver of so much of the relationship goodwill was the communications his clients had come to rely on. He didn’t understand when he lost two important clients that what opened the door to another advisor was the promise of more regular communications and help following up on all the other critical items necessary to have your financial health and life in place. As with many things in life, if we see the world only through our own filter and what we value rather than through the eyes of others, we can often miss easy opportunities to create and sustain the goodwill and ease a relationship needs to survive.
Use Straight Talk
There is much to be said about Baby Boomers and their unrelenting ties to their youth. Many communication experts would advise you to talk to them about their well-being and appeal to their agelessness. It’s often recommended to speak in terms of their future, but in a way that conjures up their youth.
Let’s return again to Andy Reder’s practice, in which Andy counsels wealthy individuals and many Baby Boomers. All of his clients ask him to create a pro forma to estimate their living expenses and to feel confident that they can continue to live well and retire on the amount they have saved. In typical Boomer fashion, many of them do not believe they will start slowing down until age 95 or thereabouts.
What Andy has found over the years is that his Baby Boomer clients are correct. In their late 60s and early 70s, they do need a similar cash flow that they received in their pre-retirement years. These early retirement years are the years they are traveling, entertaining, and dining out as they always did. It’s during these years that many of his clients also make significant gifts to their children, usually in the form of tuition or home down payments. However, what Andy sees that many of his clients fail to realize is that by the time they enter their mid to late 70s, their lifestyle drastically changes. They stop going out as much, buying new clothes is less frequent, traveling long distances starts to feel like a hassle, and all around they start spending less.
What stood out to Andy is how few advisors want to counsel them on this common tapering of activity and spending. In spite of the warnings to make Baby Boomers feel young at all costs, Andy takes the issue head on and in doing so has found his Baby Boomer clients appreciate the candor, and trust him more. They envision their retirement in new ways and while they don’t front-load their expenses in the early years, they do prioritize their most meaningful dreams and moments and make sure to make time for them. Our experience with investors supports this. The more direct, the more candid, the more you can provide the breadth of your experience, the more drawn clients are to you and your advice, and the relationship overall is more sticky on account of its authenticity.
Be Helpful in New, Unexpected, and Highly Valued Ways
Many of our clients find that their older Boomer experience not only gives them more fatigue or health issues as they age, they also feel overcome by the things that once provided great pleasure, for example, travel. The same clients who were once vital, nothing is going to stop us Baby Boomers traveling every few weeks or months to all of our bucket list places, now find the activities like carrying bags and the reliance on technology for everyday tasks like printing a boarding pass or checking in to a flight to be overwhelming.
One of the advisors with whom we work recently visited his client to review the client’s portfolio. The client was distracted during the meeting and confessed to not being able to concentrate on account of being worried about the details surrounding the trip he and his wife were taking the next day. The things that can feel like they’re making us more efficient and that are simplifying their lives, like using the airport kiosk to print boarding passes, had this older client perplexed and stressed.
The advisor in this story pressed pause on his own agenda and what he wanted to cover with the client to call their son who lives nearby and ask him to print and bring a copy of the boarding pass to his father. This small act of solving this seemingly small problem was the highlight of our advisor’s client’s afternoon. The stress of traveling without feeling intimidated or unsure was relieved. While there was very little said about the investment conversation our advisor had planned, he was far from frustrated. Rather, the advisor found the entire experience rewarding because he was able to help his client and the client was appreciative.
This story seems simple but for us it was powerful because it framed value in a new way. This older Boomer client who was starting to feel a little intimidated about the world was now very appreciative. As the advisor was leaving, it struck him that this is one of his few clients who never asks, “What am I paying you?” Rather, this client measures the value of the relationship by the degree to which he feels cared for, and it has little to do with performance. He wants to know that his assets are where they are supposed to be, and that he feels safe and looked after.
So many of us focus on client retention strategies. We look at variables like the number of referrals we have received. We can overcomplicate ways to make our clients feel appreciated, from sporting events to fancy dinners, anything to retain solid footing in the relationship. Perhaps client retention is much simpler; perhaps it’s a factor of caring more deeply, showing up in new ways; perhaps it’s just about the way we are there.
Compete on Transparency
As your Baby Boomer clients enter their highest-earning years, many of them recognize that the paycheck at this level won’t last forever. In some aspects of their life, spending is really dialed up—they may be buying second homes, taking trips, and expressing feelings of abundance with wine collections and art. Those same clients, though, are becoming more cost sensitive in other ways. Many of our clients understood this when either prospecting new business or reinforcing their value with existing clients. They’re putting the portfolio and the cost of owning the funds at center stage. With prospective clients, they will present the cost of holding the funds, securities, and electronically traded funds or ETFs that the client currently holds and show it compared to the asset composite they would recommend. For existing clients, they will perform a similar exercise to reinforce the successful results being achieved for a fairly low cost.
This kind of transparency is mind-boggling and new to many clients. Most investors understand that they will pay a fee for the advice and guidance an advisor provides—and like all things that we value, most do not question the price of peace of mind.
But when presented with the choice of the same outcome for more or less fees, most would choose to pay less. Yet many portfolios are laddered with the unnecessary high fees that are often incurred just for holding certain securities or asset classes, in particular, hedge funds, private equity, or variable annuities, without the need or additional return to justify it.
Many times, though, these costs are buried, so clients may not even understand or, like the case of one of our advisors’ prospective clients, an 80-year-old woman who was sold an expensive and illiquid variable annuity. When the proposal pointed this out, the shock and disappointment alone were enough reason to stop doing business with a product salesperson and seek to work with a fiduciary advisor.
Leading with transparency is also an appealing strategy for the Millennial generation, who we will cover soon. In fact, as we still seek to rebuild trust in our industry, transparency and authenticity are generation-agnostic strategies.
Be Brave and Have Hard Conversations
When we ask our clients what keeps them up at night, sometimes we hear the most unpredictable answers, like this one from a client “helping my client avoid making poor decisions.”
Baby Boomers—Early and Trailing—often have significant wealth and can carry guilt or desire to help their children during tough or good times. Many Boomers watch their children go through divorces, buy homes, or want to fund an entrepreneurial spirit. They make substantial monetary gifts to fund these endeavors or bail their children out.
Yet this same advisor shared with us that he watched two clients go into debt because of their parental instinct to put love and help their children over their own financial needs and reason. One of the clients referred to in these scenarios watched their net worth drop from $5,000,000 to $500,000 because of their children’s mismanagement of an opportunity. It is really hard to say no to our children, but when we make decisions only from the heart, the results can be devastating in retirement.
The best advisors help their clients understand the implications of their decisions. They work with them to forecast best- and worst-case scenarios, making sure the outcome is positive no matter which one should occur. They also help facilitate these discussions and provide their clients with ways or strategies to say no to a request while preserving the relationship. They are not afraid to intervene on their client’s behalf or engage family counselors and family governance experts to help. In fact, we see family governance support as an important skill advisory firms are either staffing for or developing their own muscle around.
Talk about the Joneses
Our clients tell us that another poor choice their Boomer clients make is trying to keep up with the Joneses. Come mid-50s to early 60s, with some money in the bank and their careers on solid footing, many Baby Boomer clients start to look around and take stock of what their peer group and colleagues are up to. Our advisor clients tell us this is fatal for their Boomer clients. Some, from a financial perspective, stretch for things like second homes. Others can afford the financial component but have not thought through the emotional aspect of making choices because someone else made a similar one, versus their own authentic desires.
It’s hard to help our clients escape the stream of messages from advertisers and the influence of people around them. Even wealthy people get in over their heads. Sixty percent of NBA and 78 percent of NFL players file for bankruptcy within five years of retirement.13
It is also difficult to help unwind younger Baby Boomer clients from comparisons in market performance, too. This competitive generation looks for places to compete everywhere, including how they are doing compared to the market averages. It takes some effort to retrain your clients to think only of the benchmarks they are trying to beat. It’s similar to the older Boomers and Matures for whom fear can drive a singular focus on capital preservation without proper risk management. Those clients focused on performance are also driven by emotion and not prudence and reason. We have to help shift their thinking from beating someone or something (a benchmark) to thinking about the outcome they want for their life.
By now we know that a financial advisor’s job is not one dimensional. It’s not only about managing the money. We are also sounding boards and educators. Financial literacy programs are sorely lacking in our country, and providing insights around spending and saving often falls to the advisors. Advisors can also help with the emotional aspects of money.
Take Ross Levin, founder and president of Accredited Investors Wealth Management Inc. Ross has built his business around four tenets:
- Wealth management
- Professional advice
- Money and values
- Investment approach
This is a wheel, or a 360-degree view of his client’s life. In the many conversations we have had with Ross, he never addresses only one plane, for example, the investments. Whether it is a plan to budget better or save for retirement, Ross seeks to first understand someone’s values and their intention behind the money. He is not afraid to constructively challenge his clients, taking them through a Socratic process to separate wants and needs, the merits of giving your children everything from a financial perspective and the burdens of it too, or the joy of giving freedom. He has helped clients understand when they’re really hungry for companionship or affection, for instance, and helps them identify resources and strategies to name those feelings rather than continue to indulge them, hoping the next new thing will bring relief.
Ross is generous with his insights, not only with his clients, but in his weekly column, Spend Your Life Wisely. To become someone’s trusted advisor, you need some basic skills. You have to be able to see the big picture and communicate well. But you also need to know how to have the hard conversations. You need to know how to tell the truth from an authentic and caring place. Ross is exceptional at this and it is the glue in his client generations from Baby Boomers on down.
Help Your Clients Protect What Matters
The average age for a man to experience a first heart attack is between 45 and 66.14 It doesn’t take your clients too many of these examples to start feeling some anxiety themselves and want to very quickly get their financial house in order. Baby Boomer clients will be more focused than most on working through the details of their estate plans, medical proxies, and living wills, and revisiting insurance policies. Most advisors understand this and have built out considerable networks and resources for clients to tap to ensure these foundational plans are in place.
It is a mistake to simply hand off these relationships to other professionals with expertise. The top-performing advisors remain connected and quarterback these relationships. They also use their trusted advisor skills and offer support to their clients as they think through the challenges of estate planning today, including:
- The implication of longer life spans
- More divorces and blended families
- Retirement accounts that have been severely affected by the financial crisis
- The need for long-term care and the reality that children of today’s generation are much less likely to become caregivers of their parents
- Uncertainty of Social Security and defined benefit programs
The best advisory businesses see these networks as complementary and as partnerships, not competition. Advisors are a valuable partner to estate planners and can help craft a plan in a much more thorough way with their knowledge of the client relationship and their goals. The advisor’s clients appreciate their continued involvement and tend to feel more at ease with the advisor present and looking over the documents and the decisions. When the advisor stays involved, clients tend to report a stronger sense of satisfaction with the relationship, as there’s a sense that the advisor is connecting and overseeing all the providers: estate planners, insurance agents, accountants, and elder care specialists. It’s an easy way to stay involved and demonstrate high marks on caring and accountability for the client’s life.