When it comes to talking about retirement, eldercare, and inheritance, parents may be from Mars while their grown children might as well be living on Neptune.
Thats the implication of a Fidelity study on intra-generational finances.
To cite one example, 97% of parents that are over the age of 55 and their grown children that are over the age of 30 disagree on whether a child will take care of those parents who become ill. Sticking with the 97% theme, 24% of the responding children believe they will have to help their parents financially in retirement, while 97% of their parents said they will not need help.
Such disconnects result from a lack of communication between generations. The good news for financial planners is that most parents (68%) and their adult children (60%) said they were more comfortable talking with a financial professional than with each other (55% and 47%).
One of the biggest challenges facing financial advisors is getting to the next generation, who will inherit from their clients, said Larry Sinsimer, senior vice president of practice management at Fidelity. Pointing out the results of our study is a great way to begin the conversation.
According to Fidelity study, only 55% of parents and 47% of children said they were very comfortable talking to each other about their personal financial situation. Even when they did discuss spending, budgeting, long-term savings or investing, the conversations were often not detailed and poorly timed.
Financial planning clients are more likely to be the 55 plus than the 30 clients. At client meetings, advisors can point to the Fidelity study and ask their clients if theyve discussed such issues with their grown children, Sinsimer suggested. If not, urge them to start the discussion, he said. Tell them that such conversations will happen, at some point, and its better to do it sooner than later.
Whats more, advisors can position themselves as unemotional facilitators, and thus earn a spot as these family meetings. Show the children that youre not just Dads broker, Sinsimer said.
Be ready to talk about things like durable powers of attorney and health care proxies. The more you establish your ability to act as the familys advisor, the greater your chance to retaining assets when they pass to the next generation. Otherwise, all the hard work youve put in, helping the parent to build up net worth, may be lost when the children inherit.