BARRY MANILOW LIVE 556959At the risk of exposing just how deeply my nerdism runs, I am going to share this little story from my youth because I think it will help me make an important point.

When I was 12 or 13 I made my first music purchase. It was the album Barry Manilow Live, and it was on 8-track tape. I listened to it hundreds of times on a sound system that was fairly advanced for its day.

I think I still have that 8-track tape in a box somewhere. I could never part with something with so much sentimental value to me. It’s a keeper. But one day I will be gone and my children will inherit it – at which point they will very likely discard it. Once a best selling album produced in the highest-available-quality format, it is no longer useful. The father’s music collection is not the children’s music collection.

A similar phenomenon is starting to play out in the world of financial advice. Stick with me as I walk you through this...

In the years following World War II there was a surge in the US population. Seventy-six million Americans were born between 1946-1964, and they are collectively known as ‘the Baby Boom’ generation. Raised by the Greatest Generation, the Boomers continued the efforts of their parents. They worked, designed, innovated, and invested to build the United States into the richest and most productive nation the world has ever known. Along the way they became the wealthiest generation of Americans. Baby Boomers have an estimated $30 Trillion in accumulated assets.

The inexorable march of time is catching up with them, however. The Social Security Administration estimates 10,000 Baby Boomers die every, leaving behind accumulated assets that can’t be taken with them; assets that become inheritances. The next twenty-five years will see an unprecedented generational transfer of wealth the likes of which the world has never seen.

What Will the Children do with Their Parents’ Money?

This movement of America’s wealth is starting to become a concern for the brokerage houses and large Registered Investment Advisory (RIA) firms. For decades they have thrived from the growing wealth of the Baby Boom generation. Times were good. Assets were flowing in, and their once-innovative fee structure based on a percentage of assets under management (AUM) made them wealthier every year. There was no urgency to evolve or improve.

They sold their clients fee-heavy mutual funds from the fund families that paid huge commissions. They constructed portfolios without regard to costs or tax implications. Most advisers to Boomers never bothered with any real financial planning, and when they did it was a cookie cutter template. Why engage in financial planning when the goal is to get assets under management? Success was measured by accounts and assets, not client results.

The inexorable march of time is catching up with these advisers, too. Technology has significantly impacted client expectations. Think about it. If I get a quarterly investment statement delivered to my mailbox I don’t open it because I want to know my account balance. I open it to find the procedure for turning off paper statements. Quarterly statements by mail? Seriously? If I want to know my account balance I should be able to access that within 60 seconds from my cell phone.

Throughout the world of financial advice the mustard is coming off the hot dog. Post-Baby Boom clients know they can get generic analysis with charts and graphs for free on the internet. They are no longer willing to pay what their fathers paid for a service they don’t find valuable. When Client Smith dies, his heirs are frequently walking out the door with their inherited assets, shopping around for a new adviser.

Some RIAs are adapting to the new realities, but many are not. They seem to be clinging to the notion the changes in the industry of the past few years are just a fad, not a revolution. They try to keep transferred assets in the firm by appealing to your desire for stability and consistency. “Your father invested with us for 40 years,” they will tell you, “we can take care of you, too.” This is probably a reassuring message to someone who recently experienced significant loss. (Especially if you’re relatively new to the arena of money and investing.) But is it enough?

As a wise man once told me - the only thing that stays the same is that everything changes. The financial planning/advising industry is not exempt from this maxim. A horse was once the most efficient mode of transportation; Fotomat booths once littered strip mall parking lots from coast to coast; Blockbuster used to remind us to “be kind, rewind”. Investment advice used to come from a man in a suit backed by a large (but invisible) team that performed analysis in some back room, crunching numbers on their HP Financial Calculators and producing charts showing how your portfolio was going to increase in value. The client was expected to pay for all that overhead through high commissions and fees.

It’s not like that anymore. Things have changed.

It’s not the Boomers’ fault they paid high fees for impersonal investment advice. Just like me with my Barry Manilow Live 8-track, the Baby Boom generation did the best they could with the options they had available at the time. But things have evolved since your parents started investing. Just like my children aren’t required to use my music collection, children of Boomers aren’t required to use the investment accounts they inherit. They are taking advantage of new technology, personalized service, reduced fees, comprehensive financial planning, and the tax agility they can get with a financial adviser who embraces the revolution that has taken place in financial planning.

I am not your father’s investment adviser. I’m the one he wishes he could have found. Personalized service, transparent fees, and sound investment strategies form the foundation of my financial planning philosophy at PIM Financial Partners. You should never expect less.

If that interests you, give me a call. (757) 407-4189

The information posted to this website is for education purposes and is not intended to be investment advice. 

Registration as an Investment Advisory in the Commonwealth of Virginia does not imply an endorsement by Virginia, nor does it mean the Commonwealth of Virginia certifies or verifies my knowledge, skills, or experience as an investment advisor. 

PIM Financial Partners provides financial planning and investment advice to residents of Virginia. Residents of other jurisdictions are considered on a case basis depending on the laws governing investment advisors where they live.


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