North American youth are having a greater impact on our economy than we think. This is the message that is being shared around social economic round tables and we are seeing in how our communities and businesses are being built today. Part of this impact is because of an outward proclamation of values from the Rising Generation in the consumer behaviour, and part of it is directly tied to the the largest inter-generational wealth transfer in North American history. We are seeing this effect in our own planning services with families as they navigate the wealth transfer conversation. Boston College published a number of articles on the inter-generational wealth transfer, “A Golden Age of Philanthropy Still Beckons,” and specifically what has been expressed as the anticipated actions of the next generation (those who are about to inherit that wealth). The numbers have been adjusted since the original study in 2003, the amount of money entering into the marketplace as a direct result of this transfer is going to be in excess of $50Trillion.
I recently attended the Rotary International Convention in Toronto, Ontario. Ilona Dougherty, Managing Director of the Youth & Innovation Project at the University of Waterloo led a session on her research on the effect that the Rising Generation’s approach to social systems, employment and education has on our economy.
Youth Influence on the Economy
According to Ilona, “Youth are wired to innovate.” This innovation is manifested in a number of ways, including their ability to adapt to challenges when faced with limited resources. If you consider that 75% of today’s jobs and leading businesses will disappear by the time our society’s elementary-aged students enter the workforce, we need to be encouraging our youth to take these calculated risks and tap into their adaptive capacities.
Another reason why today’s youth will have a marked influence on our economic systems is the effect of “delayed adulthood.” As we encourage youth to stay in school longer we are also encouraging them to delay entering the workforce which means that they are living at home longer. While this might add pressure to the parents around their retirement plans, what we are seeing from a societal perspective is that there are strong inter-generational bonds within family units.
Another issue that is coming out of an education-focused generation is the increased number of unpaid internships. While students seek these opportunities out to grow their CV, they are dependent on their parents or multiple low-paying jobs, to support themselves. So they might have the educational qualifications, but the jobs are not available because those entry-level positions are now marked as unpaid internships. The positive outcome of this is that there is a generation of entrepreneurs who are looking beyond what exists in the current marketplace and creating their own businesses. The negative reinforces a delayed contribution back into our economy by way of taxes as this is a generation that will be creating wealth for themselves longer than their parents did before they start paying back into he public coffers.
So how do we, as a society, and as an older generation manage this?
What this means for the “older” generation is that we need to value those intangible assets as well as the tangible ones; for the simple reason that the way that these kids are thinking is directly impacting the investment opportunities of the older generation(s) who are investing and managing their wealth now and for the next two to three decades. The Rising Generation is not only creating new business models and disrupting long-standing industries, they are shaping policies, investment strategies and the way that money flows in the marketplace.
When sitting down with your financial advisor, and planning things out taking into considering the impact that this demographic will have on your portfolio is important. The easiest way to consider how this demographic will influence your investments is around the social capital that is within your portfolio and as a result social impact should be considered an embedded part of your financial strategy. Social impact is generated, not just by your philanthropy, it is created through your asset mix (insurance, stocks, mutual funds, etc.) that you are using to build and manage your wealth AND about the plan for transitioning this wealth, as well as your consumer behaviour. Asking questions about what types of investment strategies your advisor is recommending that balance out the need for income growth and your need to support the community, is just as important as evaluating the overall portfolio performance. Not all social capital management tools are the same, just like not all investment and wealth management firms are the same. I encourage you to take the time to sit down with your children and ask them how they see the future of business/job opportunities, and the economy. What they share with you may just influence the decisions you make around your investment strategy and the questions you ask your advisors.