Layin’ It on the Line: Labels can lead to retirement planning bias by advisors
“Don’t let your financial advisor put you in a box. You need to have your plan customized for your specific situation.” — Lyle Boss
Social science researchers and best-selling authors Neil Howe and William Strauss were among the first to track and qualify American generations. In their famous book “Generations,” Strauss and Howe introduced the concepts of “millennials” and “Gen X” into the modern vocabulary. Their new generational theory attempted to explain various societal shifts in terms of when a person was born.
The popularity of “Generations” led to widespread acceptance of the idea that it’s OK to overlook the complexities of human life, ignore diversity and reduce people to one variable (birth year).
Unfortunately, this tendency to label retirees and preretirees as “boomers,” “millennials,” and “Gen-Xers” has crept into financial services and retirement planning and is responsible for a lot of bad money advice.
Like an old newspaper horoscope, generational theory lumps everyone born within an arbitrarily designated period (1961-1981 is Gen X, according to Strauss and Howe) into one broad category.
“You are a millennial. You are lazy, entitled and easily triggered.” “You are a boomer. You hate risk and change.” “You are a Gen-Xer; you are a self-sufficient critical thinker.” Financial advisors who use these types of oversimplifications as guideposts may not bother to see beyond the labels.
For example, Harry, who was born in 1946, falls squarely into the boomer category. His advisor believes that because Harry is a baby boomer, he is challenged by technology and won’t be open to virtual meetings, video training, online client portals or other modern tools.
This advisor also buys into the stereotype that all boomers are risk-averse, so he aggressively de-risks Harry’s retirement portfolio without bothering to discover more about his client. He doesn’t even ask Harry his thoughts on risk and investing or if he’d like to do more business online because he assumes that all boomers are the same.
Generational theory in financial services is dangerous because its assumptions influence advisors to take paths that may or may not be in their clients’ best interests. Generational theory can also prevent your advisor from developing a deeper relationship with you and discovering your unique connection to money, your retirement goals and your true risk tolerance.
Perhaps your advisor builds you a more generic financial plan or doesn’t offer you certain products because they think you hate risk. It could be because they put you into a generational box, ignoring the diverse environments and upbringing which have shaped how you relate to money. You may feel as if the advisor isn’t listening to you or is refusing to take you seriously.
Suppose you suspect your retirement and income planner may be buying into generational stereotypes. In that case, the best thing to do is ask the advisor to explain their process and how they developed it. Having an open dialogue with your advisor will help ensure they listen to your concerns and offer solutions that align with your attitudes and desires.
The bottom line: Many contemporary sociologists feel that generational thinking is invalid pseudoscience. Unfortunately, though, the generational theory continues to influence financial services marketing. When looking for an advisor, strive to find someone who avoids generational stereotypes and connects with various people across multiple demographics. Your financial future is too critical to trust someone who wants to keep you in a box.
Lyle Boss is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.