For an increasing number of parents, the job never seems to end. Indeed, clients with adult children either returning to the nest or asking for financial help run the risk of having their carefully planned retirements derailed by their offspring, cautions Laurie Campbell, CEO with Toronto-based Credit Canada Debt Solutions Inc. “Adult children can suck [their parents] dry,” says Campbell. “Whether they are living with them or not, they are expecting their parents to still support them.”
In her own practice, Campbell has seen a spike in elderly clients looking for help supporting their “boomerang” children. The Boomerang Generation is a term that’s been adopted to describe young adults who return home to live with their parents after a brief, likely failed, attempt to set out of their own. In many instances, these individuals are saddled by student debt.
Campbell offers the following four tips to help your clients stay focused on planning for their retirement:
> Re-establish boundaries
The most important service you can provide for your clients is to be a voice of reason and a mediator between your clients and their children. Gather all the facts and listen to both sides. Once you have a good picture of the family situation, provide a plan of action.
Sometimes, Campbell says, parents of boomerang children want to avoid dipping into their retirement assets. Instead, they start taking on added debt through a line of credit, for example, to help their children get back on their feet.
“Sometimes these clients don’t want to talk to a planner about cashing in their investments,” says Campbell, “so they hide the debt.”
> Protect your client
While you want to be sensitive to the family situation, your loyalty should be devoted to protecting your client’s assets, says Campbell. In most circumstances, a client will stretch themselves excessively thin to help their child. While that is acceptable on occasion, Campbell says, be aware of ongoing patterns of elderly financial abuse.
“It’s friendly fraud,” says Campbell. “It’s where there is coercion by the adult child on the parent to help them financially to the extent that it jeopardizes their own standard of living.” While such situations are not common, it is a growing concern advisors should be on the lookout for.
> Reach an agreement
If, for example, a client’s adult child has suffered an unexpected financial trauma, such as a divorce or lost job, helping them get back on their feet by allowing them back into the family home is reasonable. What’s important is that there is an agreement in place to ensure that the new living arrangement will not become a long-term arrangement.
This agreement can be written or verbal, but it must contain a clause that stipulates when the child expects to get back on their feet. As the person overseeing this negotiation, it is your role to make sure everyone understands his or her responsibilities.
“It’s a hard conversation but it ensures the child has an understanding that this won’t last forever and the parents won’t be taken advantage of,” says Campbell.
> Consider cross-generational implications
With the burgeoning number of boomerang children, Campbell sees a potential growth opportunity for your practice —transfer of assets to the children through vehicles such as living wills. “You’re seeing lots of [older] people that aren’t waiting until they die to pass their money on,” says Campbell. “Living wills could be an opportunity to help gain the child as a client when they reinvest those funds themselves.”