So, what’s your favorite story from the recession? Mine is when former Lehman Bros. CEO, Dick Fuld, got punched in the face at the gym. I still can’t believe someone did what everyone on Main Street was thinking. Did it put dollars back in the pockets of those who lost it all, or prevent the economy from melting down thereafter? No. But on a visceral level it felt damn good. It was what I call “Main Street Justice”. While that’s my favorite recession story, it’s not my story.
The longer version of this is told in pages of The Millennial Money Fix and in a number of podcasts throughout the past several years, but the gist of it is that I moved to NYC in early October 2008 to work with a 30-something-year-old CFP®. I am currently 33 in case you’re wondering. Our office was ironically located in the Helmsley Building, which sat directly across Vanderbilt Avenue from the recently defunct Bear Sterns building.
Upon my arrival my new boss was nowhere to be found. I quickly learned that his personal life was melting down alongside the economy. Even my own new living situation was in jeopardy as my random Craigslist roommate lost his job in equity research at Jefferies. Shit was hitting the proverbial fan to say the least. On top of it all, Heather watched all her job prospects get defenestrated as law firms called off their recruitment of fresh talent for the foreseeable future.
For the next 18-months I sat in the middle of the financial apocalypse on Park Avenue fielding phone calls from clients I’ve never met. I was drinking out of the firehose. All I knew for sure was that I’d be on a JetBlue flight back to Boca Raton if I didn’t convince everyone to calm down and stay put. I did this day in and day out. None of it was fun and all of it was crazy-scary but despite it all, I came out a better advisor and investor.
I feel like the Bane of Wall Street. You think the recession is your ally? You merely adopted the recession. I was born in it, molded by it. Indeed, my ascent to full-fledged financial advisordom (and adulthood) was intertwined with daily anxiety, self-doubt and professional loneliness. With feelings like these from someone like me, it should come as no surprise that my generation would be labeled as being afraid to invest in the markets. However, despite a conveniently convincing backdrop for that argument, I don’t believe it to be true.
Last week on his blog, Barry Ritholtz pointed to a June 2018 “Risk-Taking Across Generations” study by Vanguard. It of course backed up the logical claim that Millennials are risk adverse as a direct result of the recession. As Barry pointed out, the study’s most startling find was that “Millennials who started investing at Vanguard after the global financial crisis are more than twice as likely to hold zero-equity portfolios as those who started investing before.” Holy shit. We’re doomed!
Not so fast. Despite article after article and study after study suggesting Millennials are scared of investing, I believe there’s more to it. Most of my clients are Millennials and I can share with you that their retirement money is mostly, if not all, in equities. The same is true for my superstar savers who sock money away for retirement beyond of their 401(k)s. If that’s true, where’s the disconnect? Well, it’s the same drum I’ve been beating all year. Sure, fear is a factor once you’ve been through the ringer and have seen some things, but our hesitation to invest is less a function of what we witnessed and more about our financial realities.
The truth is many Millennials have not simply earned the right to invest. They either are in no position to be investing because they have not yet grasped the fundamentals of personal finance, or they have not arrived at a point in their financial lives where putting risk on their money makes sense. As I’ve pointed out on numerous occasions like this this CNN Money article, investing is falling lower on the Millennial’s priority list for a number of understandable reasons.
Losing money in the markets is scary, but being unable to pay for our expensive educations, afford the outrageous costs of housing and transit while simultaneously overcoming 40 years of stagnant wage growth is downright terrifying. When the average Millennial makes less than they spend, how can you talk to us about investing in stocks market much less saving for a rainy day fund?
The sooner advisors and the media can relate to the financial realities of Millennials the sooner I’ll take stock in a study or survey suggesting Millennials don’t want to invest in the market simply because of trauma related to the recession. It’s just not that simple so let’s stop pretending you know what it’s like because you made some people between the ages of 22-37 fee guilty about missing out on this latest bull market. Happy 10th.
To quote Bane, “I didn’t see the light until I was already a man, by then it was nothing to me but blinding!”