Gen Y'ers are not savers
- From: "carrera d'olbani" <dolbani@xxxxxxxxx>
- Date: 6 Apr 2007 05:41:00 -0700
http://www.theaustralian.news.com.au/story/0,20867,21506187-25658,00.html
Why financial life is like a football game
* DEMOGRAPHER
Bernard Salt
* April 05, 2007
FORREST Gump's mother got it wrong: life's not so much like a box of
chocolates as it is a football game. And the reason is that modern
life comprises four quarters of 20 years apiece.
The first quarter is spent developing and learning, largely at the
expense of someone else, such as parents or the state.
The second quarter is spent reproducing, building a career and paying
taxes.
The final quarter is also spent largely at the expense of someone
else, such as the state, or in fact drawing on savings and investments
accumulated earlier in life.
The missing element in this match is of course the all-important third
quarter. Here are 20 perfectly fine years that sit on the
unfashionable side of 40.
By this stage of the game reproduction has all but ceased, career
trajectories have been set, and the only thing that seems to rise
effortlessly is taxation. And personal costs. And the demand for
investment for use in the final quarter.
Those beyond 80 understand that they are already well into "time on"
and expect the final hooter to sound at any moment.
If you analyse this match it is not the glamorous second quarter where
the game is won or lost, it is in the third quarter of life.
The years between 40 and 60 should be the reaping years. Here is a
time when effort multiplied by skill, training and positioning should
yield enough money to support the final quarter. Or at least that's
the theory.
After all, if you don't accumulate wealth in the third quarter of
life, when can you?
The theory of superannuation is that you stash it away from an early
age and, via the magic of compound interest, you have sufficient funds
to happily motor through the final quarter, and perhaps even beyond
into an extended "time on".
But what if you haven't stashed it away since the beginning of the
match? What if you spent the first and second quarters happily
flitting here and floating there, using all available funds and more,
gaining a wealth of experience but not much of anything else?
If this is the case, then the third quarter had better be a damned
good effort.
This effort is of course made easier if you can draw upon skills and a
positioning that were set-up in the first half of the match.
"Skills" refers to education, which is the first quarter's focus.
"Positioning" means leveraging off the business relationships
established during life's second quarter.
If life is indeed like a football match, then business opportunities
should change as one demographic segment moves from quarter to
quarter.
The "money" quarter is undoubtedly the third quarter: here's where the
real wealth is formed and invested. I might add that it is in the
third quarter that many football coaches also claim that the game is
either won or lost.
What a pity from, say, a fund manager's perspective, that the entire
population is not permanently engaged in the third quarter of life:
always creating, but never drawing on, wealth that must also be
managed.
What bliss this would be. But alas it is not possible to prolong the
third quarter indefinitely.
Well, maybe and maybe not. This is because the same effect is achieved
if lots and lots of people suddenly shift into the third quarter and
start to play the game like never before.
Over the 15 years to 1991 the number of Australians in life's third
quarter (aged 40-59) increased by 17 per cent. Over the following 15
years to 2006 the number of players on the field in this quarter
jumped by 59 per cent.
In the last 15 years the number of people in the wealth-creating third-
quarter stage of life ratcheted profoundly. Indeed, the place to have
been in Australian business since 1991 is in the supply and management
of whatever it is that people aged 40-59 want.
And this includes the creation and management of wealth in preparation
for life's final quarter, plus the "time on".
Behold the blossoming of the funds management industry. All bow and
acknowledge the coming of "the private equity players". All hail the
new Caesars.
But what of the future for these prophets of profit and their players?
Over the 15 years to 2021 the number of Australians aged 40-59 will
increase by just 13 per cent. It would seem that El Nino is about to
make a career shift, from chasing away the rain to the extermination
of third-quarter players.
The flow of money cascading, tumbling and surging into vast pools of
superannuation funds must therefore slow to a trickle compared with
the flow that prevailed over the previous 15 years. No doubt the
management of some funds attributed surging balances to their
outstanding performance. And this may well be the case.
But in other instances the ever rising pool of funds has been deepened
by the pithy fact of 15 years' demographic surge.
The soft demographic growth predicted for the wealth creation and
management industry must, or at least should, prompt concern and even
longer-term thinking. After all, what horrors lie beyond the current
boom and beyond the boomers for the funds management industry?
I have been to that abyss. I have peered into the darkness. And I have
truly sighted that terror. What lies beyond the boomers is Generation
Y.
Here is a generation that can't deliver the players, let alone
significantly increased player numbers, that third-quarter businesses,
such as funds management, have become used to.
Not only that, these infidel Ys don't "believe in the game": they see
no imperative to invest now in order to reap later.
Perhaps the boomers will change the game and shift their reaping years
into the early stages of the final quarter. Perhaps the Ys will
repent, submit and duly render unto the new Caesar that which is
Caesar's.
Then again, perhaps growth of the wealth management industry will
simply slow as lesser-scaled generations follow the boomers into life-
reaping years.
.
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