Ahead of the Curve
Having come of age amid turbulence, the next generation of investors aims for prosperity
by Bill Donahue

“May you live in interesting times.” Despite its overuse, this saying—said to be of Chinese origin, often seen as equal parts blessing and curse—can certainly be applied to the first six months of 2016, which gave rise to the likes of Brexit, rampant gun violence in America and the most antagonistic presidential race in recent U.S. history, to name just a few.

Growing up in such a topsy-turvy world surely affects one’s outlook, including one’s approach to planning for the future. Younger investors, meaning millennials—the first generation to come of age in the new millennium—have also lived through two significant bear markets and a current environment characterized by low returns. As a result, millennials crave the financial security many of their parents forfeited in the financial crisis of 2008, according to Kimberly J. Brumbaugh, founder of Brumbaugh Wealth Management LLC in Exton.

“Working with some millennials, including the adult sons and daughters of a lot of my clients, I find them to be more conservative financially,” says Brumbaugh, whose firm represents clients in 21 states. “They want to be secure. Once they finish college, they’re looking at budgeting. They like to a have fair amount of cash on the sideline—probably similar to all of us starting out—but they have seen the challenges their parents went through, including the events of 2008, where many of their parents lost their homes. They don’t want the same thing to happen to them.”

Despite this conservatism, stagnant wages and limited opportunities have left many falling short. Three out of four millennials receive financial assistance from their parents after college, ranging from health insurance to rent—even monthly spending money, according to a recent UBS Investor Watch report.

Brett J. Rhode, CFP, senior vice president – wealth management with UBS Financial Services Inc. in Conshohocken, has firsthand experience with this phenomenon. He has two adult children, now ages 23 and 26, and he’s still involved in their lives, financially speaking.

“A lot of my peers are doing the same,” he says. “Maybe they have a son or daughter who is still on their auto-insurance policy, or maybe their kids moved back home—because the parents want to help or because their children need them to help—and it’s happening at a very high rate. It seems like we have a lot more fixed costs today. My father paid for my college, and once I graduated, I think I asked for $500 and that was the end of it. Life was a whole lot simpler then.”

Despite the prevalence of this trend, Rhode believes parents should exercise caution in how they decide to support their adult children.

“It’s not always in the best interests of the parent from a financial planning standpoint, because that extra $1,000 to $2,000 per month might take away from their financial plan,” he says. “We’re in a challenging environment right now, with low returns, and as we look forward we don’t see that changing. … In a lower-return environment, once someone is retired or close to retirement, you can’t fill the pot back up. The average retired couple is living well into their 80s or early 90s, so they’re dealing with 25 to 30 years of retirement. The point is, you can’t over-support your kids to the detriment of your own retirement, and I’ve seen real-life examples of that happening.”

Adds Brumbaugh: “Whether it’s helping with a cellphone bill or helping to buy furniture, you see a number of folks in the world who are dipping into their savings and delaying their retirement. For a lot of people in my generation, they’re not only supporting their own adult children but also supporting their aging parents, many of whom need long-term care. It’s a unique time.”

Rhode recommends young investors plot out their fixed costs and variable costs to determine a budget that can help them practice their own brand of fiscal responsibility.

“The easiest step in today’s world has to do with 401(k) plans,” he says. “Most companies offer a 401(k), and most offer some type of matching. Any millennial should at least save whatever it takes to maximize the matching. For someone in their mid- to late 20s, they’re going to benefit from the greater effect of compounding interest. The money saved at 25 is a whole lot more important than the money saved at 55, because it has more time to grow.”

As millennials are the first generation to have grown up with handheld Internet-enabled devices, most have never known a time when they did not have unfettered access to information about … well, pretty much everything.

“The information is so much more readily available now; there never used to be a financial news channel, let alone three of them,” Rhode says. “Today everything is instantaneous, so it’s a lot easier for not only millennials but all investors to be over-reactionary, and having too much information can force you to make bad decisions. Also, in the last 15 years we’ve had two major bear markets, and someone’s investment perspective is always shaped by what’s happened most recently. Sometimes you never outgrow that. Look at the generation from the Depression era; that’s why those people are the biggest savers—they were scared, and they were scared for a reason.”

As a result, some millennials might choose to seek out information themselves rather than ask for an informed opinion. For this reason, Brumbaugh encourages parents—even grandparents—to “give the gift of financial planning.”

“We did a campaign this year to reach out to meet the next generation down,” she says. “We offered clients the chance for us to sit down with their [adult] children and go through their budgeting and help them understand what their expenses are, because I think they want to learn; they are more interested in money, and I think they want to do it right. They don’t want to be in the same position as their parents, where maybe they are not meeting their goals. This generation likes flexibility, they like to have choices, and they are more aware than I think some people give them credit for.”

Starting Early
Ask Eric S. Callahan of Lederach Financial, which is based in the Montgomery County village of Lederach, and he’ll say most people spend more time planning a summer vacation than planning out their retirement. He believes the building blocks of a solid retirement plan should be placed decades earlier—say, just out of college.

“Every college kid in their early 20s has student loans—in some cases $40,000 to $50,000 in loans to pay—and that’s their biggest worry,” he says. “The first thing I tell them once they have a job is to start with your 401(k) and have a forced savings plan, which is all about paying yourself first. Put it in on the first of the month, and it forces you to save 12 times a year. I also recommend they look at things like how much they spend on their cellphone, which is such a priority, but maybe that $100 could be saved for retirement for later. I always say starting small is better than not starting at all.

“I also say start early,” he continues. “First, buy a home, because real estate is a great investment. … Building up equity is huge, and with these historically low interest rates, you might as well own something instead of paying a landlord.”

While key investments are recommended, advisors also suggest dodging the temptation to indulge in “excess consumerism,” which can hurt one’s long-term financial health. For all investors, regardless of age, Rhode suggests placing a bull’s-eye on debt—be it student loans or credit cards.

“Less debt is better than more debt,” he says. “It’s too easy to pay the minimum on student loans, but leverage is not your friend. It’s been a difficult environment, with returns that are below average, so I believe this is a time to take a little less risk, not more … and I don’t see that changing in the next six to 12 months. People should be meeting with their [financial advisors] on a regular basis to ‘stress test’ their plans for a lower-return environment and make sure it still works for them.”

Investors have seemingly countless options for finding a qualified financial advisor. The following individuals have spent their careers maintaining, protecting and cultivating their clients’ assets. Their goal: to provide knowledgeable, honest guidance in their efforts to help each client attain his or her financial goals—retirement, funding a legacy or simply earning some peace of mind.

2016 Financial Professionals Resource Guide
Christy Barilotti
Barilotti Wealth Strategies LLC

Drew D. Barlow
Kirk Hasen
Brian J. McKeon
Penn Management Group at UBS Financial Services Inc.

Bradford S. Bernstein
Bernstein Wealth Management of UBS

Lisa Bodine
Frank R. Policare
Patrick Trauger
Penn Wealth Planning LLC
New Hope

Patricia C. Brennan
Key Financial Inc.
West Chester

Kimberly J. Brumbaugh
Brumbaugh Wealth Management

Rosemary G. Caligiuri
John H. Lindsey Jr.
Harvest Group Financial Services Corp.

Eric S. Callahan
Lederach Financial

Scott D. Edelman
Edelman Wealth Management Group Inc.

Steve Erfle
Loretta Hutchinson
Norman MacQueen
Michael Ptaszenski
Michael Stanton
Thrive Wealth Management

Roy M. Fairman
Marianne Inforzato
Shawn P. Kindt
Douglas E. Morisoli
Fairman Group Family Office

Robert F. Farrell
Farrell Wealth Management Group of Janney Montgomery Scott LLC

Sean M. Flatley
Timothy E. Flatley
Paul C. McClatchy Jr.
David S. Newcomb
Sterling Investment Advisors Ltd.

Matthew B. Frank
Ari Spectorman
The Doylestown Private Wealth Group

Dennis Freedman
Joel Goodhart
Stuart Leibowitz
BIRE Financial Services LLC   
Plymouth Meeting

Mark Fried
TFG Wealth Management LLC

Kevin Holt
Jeff Leppert
Mark Meloro
Market Street Wealth Management
West Chester

Scott E. Holstein
Prudent Wealth Management Inc.

Peter K. Hoover
Hoover Financial Advisors P.C.

Frederick Hubler Jr.
Thomas Ahern
Creative Capital Wealth Management Group

Terry L. Jue
Ameriprise Financial

Joseph S. Little
Bala Financial Group Inc.

Brendan Magee
Inevitable Wealth Coaching
Drexel Hill

William Manchester
The Manchester Group 

William P. Marshall
Ryan D. Murray
Marshall Murray & Associates of Ameriprise Financial Services Inc.

Robert Morris
Townsend Morris
The Morris Financial Group

Owen F. Mulhern IV
Jeff Mastronardo
Michael Traynor
Financial Coach
West Chester

Andrew R. Nehrbas
Steven M. Lane
David S. Penn
Meg Tegler Hardesty
The Nehrbas Group of Janney Montgomery Scott LLC
Bryn Mawr

Christy H. Neill
Ameriprise Financial

Sean Newman
Wells Fargo Advisors LLC

Brett J. Rhode
UBS Financial Services Inc.

Kevin Ross
Innovative Wealth Partners LLC
Bala Cynwyd

Joseph P. Sarappo III
Retirement Planning Specialists Inc.
Willow Grove

Jill Broder Steinberg
Walden Capital Advisors
Bala Cynwyd

Kevin Supka
Independent Advisor Group LLC

Andrew S. Vitek
Wells Fargo Advisors LLC

Russell Valante
Janney Montgomery Scott LLC
Blue Bell

Roy Williams
Prestige Wealth Management Group
Flemington, N.J.