How to adapt advice to the differing needs of Baby Boomers

Baby Boomers are blamed for ruining the economy and leaving Gen X, Y and Zs with more expensive health, education and housing.

But Boomers have their own challenges. Australians are living longer and in better health. The number of people aged 65 and over will more than double over the next 40 years and the number aged over 85 will more than triple, according to the federal government’s 2023 Intergenerational Report. The ageing population will create intense competition for aged care services and facilities in a sector that’s already suffering a workforce shortage.

Within five years all Boomers will be eligible for retirement, but many aren’t ready for it. Some may prefer to remain active in the workforce while others, who are renting or still repaying a mortgage, may be forced to keep working.

If money’s tight, clients may be tempted by the various early release and tax avoidance schemes available. The Australian Tax Office has warned that it’s keeping an eye out for illegal early release schemes that encourage people to set up an SMSF then use their super benefits for personal purposes. The ATO is also hunting down tax avoidance schemes that encourage people to channel money inappropriately into their SMSF to avoid paying tax.

Nonetheless, Boomers have a lot to offer the younger crowd. As the richest generation on the planet, Boomers will be responsible for the biggest intergenerational wealth transfer. By 2050, Australian Boomers are expected to pass on an estimated $224 billion to Millennials and Gen Z.

Carefully considered estate planning for Boomer clients will be essential to reduce tax risks for their beneficiaries. It’s also likely that Boomers will be keen to ensure their children and grandchildren seek sound financial advice to make the most of any inheritance.

Planning strategy

Rising costs and a crazy property market are two key concerns for Boomers, says Jenny Brown, CEO and Founder of JBS Financial Strategists.

While downsizing is a favoured option for many, it may not always be the most cost-effective move, she says.

“For example, we were talking to clients with a $2.3 million home in the Melbourne suburb of Fairfield. They’d like to downsize but a smaller home in the same suburb is worth around $2.1 million. By the time you add in all the costs involved in the sale and moving, there’s not much change,” says Brown.

So, for some, downsizing might mean moving out of the area to a cheaper suburb.

Brown says living costs were also a concern for the couple. “Five years ago they worked out they needed $66,000 a year to live. Today they need $80,000.”

The uncertain economic times mean that planning is more important than ever, she says.

In the early years of retirement, clients may want to travel, buy a new car and renovate their home. Later years may see fewer major purchases but possibly greater medical expenses. Analysis of the 2021 Census has found that more than half of all Baby Boomers had a long-term health condition.

Technology benefits

Most advisers have spent much of their careers working with Baby Boomer clients. But Brown cautions those who make assumptions about how Boomers want to do business.

Brown’s firm, which largely focuses on Boomer and Gen X clients, emerged from the COVID-19 shutdown with a new business model.

After years as a traditional bricks-and-mortar-style business - “I was always taught that you needed to have an office so that your clients could come to you” - JBS Financial Strategists has closed its office and gone online.

Brown’s team uses Zoom or Microsoft Teams to talk to clients. A few clients, who prefer face-to-face contact, pay extra and JBS hires a meeting room in the city.

Brown says other advisers told her they couldn’t possibly go online with their older clients. She retorted: “But they FaceTime their grandkids!”

The new online model has revolutionised the business and provided more flexibility for staff. It’s also more efficient and easier for clients, says Brown.

Three of her 12 team members are offshore, there’s a paraplanner in Sydney and the practice manager lives in regional Victoria, six hours drive from Melbourne.

So, check your prejudices about older clients’ preferences and challenges. It’s good for their financial futures and yours.