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ALL IN THE FAMILY

Helping millennials invest soundly

I am frustrated with some clients, in their 20s and 30s, who want to do their own investments but blame me when these go wrong,” says M, a financial adviser in her 50s. “One placed a lot of money in cryptocurrency and lost almost the whole thing. Others crave instant gratification and make foolish decisions. I prefer to deal with older clients who see the bigger picture.”

“I share your doubts about crypto at this point, and unless the market is more regulated, it seems prudent to stay away for the meantime,” I say. “I also agree that many young people tend to be impatient, but learn to work with them. As they age, they will be your main clients.”

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“I am worried about clueless youngsters getting wealth from parents,” says M.

“Talk to the parents, when you invest family wealth on their behalf,” I say. “Ask them to train their children in money matters. Demographic facts leave you no choice.”

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“Inheritance flows are set to speed up,” says The Economist in October 2020. “The population structure in most rich countries bulges outwards for the baby boomer generation and then again for their children, many of whom are millennials. Every five years, $1.3 trillion in investible assets, or 5 percent of the stock, passes down the generations in America. The pace of the wealth transfer will probably double by 2036 to 2040 as boomers die … Millennials will inherit $22 trillion by 2042.”

“Though our country skews poor, several of your clients are likely in the top 5 percent, thus you face the same situation as the US,” I say. “Furthermore, in this pandemic, a lot of investment platforms migrated online, which democratizes access to wealth creation, except when security breaches happen.”

“When our team meets with some young clients online, they don’t pay much attention to our presentations,” M says. “They are not exactly financially savvy, but they get mad when things don’t go their way.”

“Research shows that weaker students tend to be reluctant to ask questions, fearful of revealing their ignorance,” I say. “So be a good teacher. Make your presentations accessible rather than technical, foster a give-and-take climate, encourage the young ones to speak up.”

“In this digital world, how do I emphasize long-term thinking?” M asks. “I tell them about Warren Buffett, but some don’t even know who he is.”

“Actually, Buffett is respected by a lot of young people,” I say. “Ask them to read his annual letters to Berkshire Hathaway shareholders, for free on the company website. Remind them that the stock market, according to Buffett, transfers money from the impatient to the patient. Introduce your clients to Benjamin Graham. His book ‘The Intelligent Investor’ is a classic.”

“Do not blame millennials for using digital investing platforms,” I say. “When my husband and I were newly married more than 20 years ago, we used E*Trade. Electronic platforms are now easier, with minimal or even no brokers’ fees, making them attractive to millennials and Gen-Zers.”

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“The cost of investing $100 on a stock exchange has fallen from $6 in 1975 to less than a thousandth of a penny today,” says The Economist. “In 2019, the four big retail-trading platforms—Charles Schwab, E*Trade, Fidelity and TD Ameritrade—cut commissions to zero as Robinhood, a pioneer of the zero-commission model, gained popularity. A generation reared on smartphones is as likely to trust an app as a well-heeled broker.”

“Keep up with the times,” I continue. “Study emerging platforms such as robo-advisers. Slash your fees, provide premium services that electronic apps cannot, train your clients in practical ways to invest. Choose companies that are not only profitable but also sustainable, because many young people want their investments to make a difference in society. And that is good.”

Queena N. Lee-Chua is with the board of directors of Ateneo’s Family Business Center. Get her book “All in the Family Business” via Lazada or Shopee, or the e-book on Amazon, Google Play, Apple iBooks. Contact the author at [email protected]

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