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  • Writer's pictureNate Baim, MBA, CFP®

The Finance Industry Doesn't Understand Millennials' Needs

Enjoy this week's edition of the Planner's Beta

Beta (n) - climber's jargon that designates information about a climb This digest's purpose is to share observations, ideas, and treasures found this week which you may also find insightful. Sharing does not mean it's an endorsement. I am endorsing the pursuit of knowledge and exploration.

A Break from the News

Above is a photo I snapped of Becky as we waited during the blue hour for the sunrise in the Silver Star area. I've found I like sunrise photos more than sunset photos. This past week, we went to the Oregon Coast for a sunset shoot at Ecola State Park (pictures to come in later Beta editions). With sunrises, the excitement for finding amazing light only grows. First, you experience deep blues and fading stars. Second, you start to see yellows and ambers on the horizon. And last, the sun peaks above the earth, bringing warm, welcoming tones to the landscape. The opposite happens with sunsets. The land becomes cold and less and less welcoming as time continues. Becky likes sunrises more, too. I think that is because she prefers warming environments. Nonetheless, it is always great, whether it is a sunset or sunrise, to get out and experience nature with such an extraordinary person.

This Week's Articles

Wall Street will soon have to take millennial investors seriously (The Economist) - When I read these kinds of articles, I often picture a cartoonish Wall Street banker licking their chops and wringing their hands, anticipating the massive transition of wealth from Boomers to Millennials. Cerulli Associates (a consulting firm) estimates that the Millennial generation will inherit $22 trillion as the Boomer generation passes on. And large, traditional asset management firms are buying up companies to gain a position to capture portions of that transfer. However, when I observe industry restructuring, most firms focus on capturing assets under management. In my opinion, this is not the future of asset management. 

The reality is less than 20% of Millennials are financially literate. They are anxious and stressed about their finances. Their net worth is much less than their parent's wealth at the same age. Millennials are experiencing significant student loan debt. They've weathered two historic and consequential economic crises. So, in light of what Millennials are experiencing, how much wealth will successfully transfer and remain with the Millennial generation?

The future of asset management is financial coaching and planning. When I talk and work with Millennials, they are most concerned about paying down debt, saving for a home, learning the essentials of budgeting and money management. Once they have become experts at the basics, they will only begin to focus on investing. They want to learn and become masters of their financial life. And the industry has people with the skills to help them with their unique problems. The finance sector can partner with and coach Millennials with their money. However, unfortunately, the industry does not seem like they are aligning with this segment's needs. I designed Pursuit Planning and Investments, LLC's service menu to help with the very issues much of the industry fails to address for Millennials.

The 40 in 60/40 Portfolios Is Getting Wilder and Wilder (Bloomberg) - Last week, I updated my return assumptions for the financial planning models I use with client plans. I am expecting real returns to be lower in the coming years than they were in the past. Lower growth has significant impacts on planning. Clients' goals are at increased risk of not happening if portfolios do not grow as fast as they did in the past. Much of the lower growth is coming from the extremely low interest rate environment we find ourselves experiencing. Low interest rates are great for those who barrows cash. But, like many things in life, there are winners and losers. The losers in this formula are savers who use fixed-income instruments like bonds, CDs, and savings accounts to preserve and modestly grow their wealth.

The 40% referred to in this article is the fixed-income portion of a portfolio. In the past, a 60/40 portfolio provided an excellent risk and return profile for the investor. Historically, retirees chose the 60/40 portfolio because it did a fantastic job preserving and growing wealth. However, investors are manipulating the fixed-income portion of the portfolio to seek higher expected returns. We should remember, risk and return are positively correlated. To attain larger returns, one must take more risks.

It is essential to keep in mind the fixed-income portion of the portfolio is critical for managing risk. Typically, investment-grade debt and US treasuries make up most of the fixed-income part of the portfolio. Investing in these kinds of securities helps manage total portfolio volatility. Because of this, we generally expect a well-diversified bond portfolio made of high-grade assets to dampen the portfolio's ups and downs in value (especially during times of uncertainty).

So, instead of looking for "wilder and wilder" assets for the fixed-income share of the portfolio, I would argue folks should return to their financial plan first. 

If individuals see they are at greater risk of not reaching their goals because return expectations have shrunk, they should go back to the drawing board. They should begin thinking about their savings rates, income strategies, tax strategies, and goal expectations. Maybe they need to work a little longer, increase their monthly savings, pay off higher-rate debts quicker, or reevaluate their tax plan. I would look at these strategies before increasing risk. If they still have low confidence in reaching their goals, they should review their risk tolerance, capacity, and need. Only then will they be able to determine if they should take on more risk in their portfolio.

Chart of the Month - Issues to Consider When Starting a New Job / Planning Open Enrollment

When you start a new job, this shift can come with several changes that might impact your financial situation both positively and negatively. The same is true if you are planning open enrollment. New health plans and benefits may be available. And I find it useful for folks each year to use the open enrollment period as a way to reevaluate your job's income, benefits, and retirement plan. Use this checklist to review the potential impact of a job change or enrollment options such as:

  • Cash Flow and Income

  • Employee Benefits

  • Retirement Plans and Deferred Compensation

  • Taxes

  • Non-compete or other job restrictions

Financial planning can help you make the most of life's transitions.

Quote of the Week

"One forges one's style on the terrible anvil of daily deadlines." - Émile Zola


Have something on your mind? Schedule a free call with Nate.


Pursuit Planning and Investments, LLC is an Investment Adviser registered with the State of Oregon. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past results do not guarantee future results. Please contact us at 971-803-5948 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions.  Additionally, we recommend you compare any account reports from PPI with the account statements from your Custodian.  Please notify us if you do not receive statements from your Custodian on at least a quarterly basis.  Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.

Investing involves risk. Past results do not guarantee future returns. This content should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice. The performance of an index is not representative of any particular investment, as you cannot invest directly in an index.


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