Young Generations at Risk: Increased Tax Burdens

New data shows that younger generations face a higher tax burden than the generations before them. In addition, they anticipate having to fund a higher proportion of their retirement with personal savings, as few will have pensions or inheritances to fall back on. They will need help from highly trained Real Wealth Managers who understand their fiscal plight and are willing to build long term relationships.

Which generations should be most concerned about their financial future, and why? A recent report from the C.D. Howe Institute, entitled “Intergenerational Fairness: Will Our Kids Live Better than We Do?” warns, “The projected lifetime fiscal burdens of the youngest generation (born since 2005) and future generations are very high: higher than those of any other generations, especially those born from the mid-1950s to the 1990s.” The study points to health-care costs as among the major issues, if spending grows at the same rate it did from 1996 to 2010 (3.3% annually) rather than the 1.3% assumed today. The ever-climbing cost of health care, and other factors, shifts the resulting tax burden to future generations and renders a large and unsustainable imbalance.

Rising interest rates further complicate matters for the affected generations most at risk. Baby Boomers and their children are expected to fare well, with their grandchildren and subsequent generations subject to increased challenges due to this fiscal imbalance. Though Millennials, born between 1981 and 1996, will not immediately face the increased tax burden outlined in the C.D. Howe Institute report, the financial trends and tendencies emerging in this cohort show why tax-efficient wealth planning will be critical for the generations that follow.

A report from Angus Reid Institute and The Globe and Mail, published on January 28, indicated that 60% of Millennials (age 18 to 37) polled have little to no money in savings. Most of those who have saved have $25,000 or less, but 56% believe their personal savings will be what funds their retirement. Only one-third also expect to rely on government pensions. Very few (30%) expect to benefit from work pensions, and even fewer (11%) believe that inheritances from parents or family will keep them afloat during retirement.

These younger generations, starting with Millennials, will be more reliant upon personal savings than any generation before them, which means they need assistance to build on the nominal savings they have today (if any) and grow their personal wealth before they reach retirement age.

A newly updated certificate course from Knowledge Bureau, which will go live on February 8, can help advisors fulfill a critical role that will be in high demand as these generations navigate their way through adulthood. Elements of Real Wealth Management shows advisors how to provide exceptional value through optimized planning that will help their clients and their family succeed at every important lifecycle stage in order to achieve, maximize and preserve their wealth. Participants in this course will gain a sound working knowledge of the four key elements of Real Wealth Management — accumulation, growth, preservation and transition — and how to apply them to joint decision-making using the Real Wealth Management Process. Students will learn via the following course components:

• Defining Real Wealth Management - The four elements and key principles of Real Wealth Management.
• The Strategic Approach in Real Wealth Management - How to focus planning on sustainable wealth and the client-centered approach.
• The Costs of Building Wealth – Income, when used most efficiently, is the primary tool in building wealth. What are the costs associated with building wealth?
• Objective-Based Planning and Joint Decision Making - Understanding strategic planning and how to process key age milestones using a defined product selection framework.
• Managing Sources of Income and Capital – Income, when planned properly, can create capital that generates future income, which in turn contributes to the family wealth for generations.
• The Real Wealth Management Process - The role and objective of each of the five steps of Real Wealth Management, as well as life and financial triggers at each stage.
• Elements of RWM: Accumulation - Exploring the principles involved in accumulating wealth.
• Elements of RWM: Growth - The steps to grow wealth on a tax-efficient basis.
• Elements of RWM: Preservation - The three principles of wealth preservation and the tax consequences.
• Elements of RWM: Transition - The components of a wealth transition plan.
• Leading the RWM Strategic Plan - What leadership skills does the student have and how do they affect their role?

Additional educational resources: A free trial of Elements of Real Wealth Management is available, or make the commitment to offer a new value proposition by taking the complete Real Wealth Manager designation program.

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