That piece I wrote this week on new financial advisor and client research from Edward Jones and Cerulli Associates had an interesting data point buried in the cross-tabs.
Asked what financial fulfillment means to them, 36% of Millennials and 44% of Gen X Canadians told researchers that early retirement is a priority. Among Boomers, just 24% said the same.
These studies often present data cuts by generation, mostly because people like me think it’s important to understand how young adults think about money in comparison to older adults. There’s validity to that of course — financial advisors who talk with 30-year-old clients the same way they do 60-year-old clients aren’t likely to keep both for long.
But as we know, how clients think about money is as much a product of life stage as it is which generation they fall into. My guess is that the 24% figure is more a reflection of those respondents’ proximity to retirement than it is some quirk of Boomer philosophy.
Can it really be a coincidence that those least likely to see retirement as part of what it means to be financially fulfilled are those at retirement age?
What the Millennials and Gen X respondents are demonstrating is an important cognitive bias known as “the end of history illusion.” We can thank psychologists Jordi Quoidbach, Daniel Gilbert and Timothy Wilson for that phrase. It’s from their 2013 paper, published under the same title.
Their research found that people have a tendency to believe they are fully formed, emotionally. We’re about as smart as we’re ever going to be, and our opinions aren’t likely to change in the years ahead. We’re nothing like we were 20 years ago, but we’ve done about all the growing up we’re going to do.
From the abstract: “People, it seems, regard the present as a watershed moment at which they have finally become the person they will be for the rest of their lives.”
So, the 35-year-old who is too early in their career to really love their work, and is probably overwhelmed by family and other responsibilities, can’t wait to get out of the rat race. Early retirement isn’t just a goal — it’s a must.
Which means that when she comes to you for a financial plan, she’s almost certainly going to ask for the wrong retirement date.
I asked Julie Petrera, senior strategist, client needs at Edward Jones Canada how she thinks advisors ought to deal with that. She said it’s about financial planning vs. the financial plan.
“Focus on the process more than the output,” she said. “What’s important in that process is discovery and rediscovery.”
Petrera recommends that advisors cover these basic assumptions every chance they get to speak with a client. Don’t just talk about what’s happening in the markets and changes to their circumstances. Ask them if they’ve changed their mind about anything.
And explain why you’re asking. Once your client sees planning as a dynamic exercise, you’ll be better able to make the necessary adjustments. You’ll also have more opportunity for contact and a deeper relationship.