No Profits No Match

076 No Profits, No Match

Here's what we have on tap for today:  Millennials are stingy with their money, 401k matches get cut, another life insurance company sheds their broker-dealer and one CEO says the poor should stop whining.

 New Survey Says Millennials are Stingy

According to a recent UBS Investor Watch survey, millennials, the generation born between the early 1980s and the mid 1990s are not living up to their narcissistic, consumerist expectations.  Collective groan.

Yes, it seems that the youngest “generation” of Americans are not buying stuff nearly as much as their parents.  In fact, their keeping cash on hand and competing fiercely in the job market.

Research tells us that despite being stereotyped as glued to their iphones, self-obsessed and lazy…they're really not living up to the stereotype at all.

Even more surprising, they are being compared to their great-grandparents with more of a Depression era mentality.  They believe in holding on to their money for a rainy day.

The survey revealed that Millennials are hoarding cash because it makes them feel more secure. Even more…millennials are not chasing stock market returns (gasp).

You think Wall Street is worried?  You bet.

Too many who are a part of this generation watched their parents and grandparents retirement savings evaporate during the financial crisis of 2008.  It has made them less trusting of the market and caused them to see things in a different light.

Get this…

Additional data reveals that Millennials are more likely to use a savings account as a primary savings vehicle than to use IRA's or other investment strategies.  Our hats off to them.

The 401k Match Squeeze

It seems that employers are putting the squeeze on 401k matching contributions.  Yes, many employers have begun holding back on the amount and the timing of contributions for employee 401ks.

Brigitee Madrian, a Harvard professor says, “There's been an implicit contract for years and years–workers save and companies match–but now they're changing the rules.  Most individuals can't do it on their own.  We're going in the wrong direction.”

Hate to say we told you so but…

We told you so.

The rising popularity of 401ks over the last three decades is analagous to boiling a frog.  Just gradually turn up the heat (cut matching, change formulas and vesting schedules) and they'll never even notice.  All the while, we'll just keep telling them how great it is.

For the past 30+ years, the investment industry as a whole has worked diligently to convince everyone that the 401k is a vast improvement over traditional pensions.  It gives the employees more choice, freedom and unparalleled flexibility for changing jobs.

All true but I'd venture to say it's worked out better for the investment industry than it has for the American worker.  To the tune of $4 trillion in 401k accounts. Guess who gets toe collect asset management fees on that money?

In fact, all the numbers tell us that the median balance for 401ks and IRAs in households headed by those ages 55 to 64 is somewhere between $120,000 and $140,000 depending on which research you're looking at.

I'd say that's not a huge success for the worker. It's going to be hard for anyone to generate much retirement income from that small a pot of money…don't you think?

Another Life Insurance Company Sheds their Broker-Dealer

Just last week, Midland National, the flagship life insurer of the Sammons Financial Group, Inc., announced they would be divesting themselves of their controlling ownership of Sammons Securities Co.

They announced that minority partner, Jerome Rydell is purchasing controlling interest in the firm.  The broker-dealer will be renamed 300 Parkland Financial under Rydell's ownership.

Are we surprised? Not really.

We've seen a trend in life insurance companies getting out of the B/D business over the last few years. It has just become to much of a regulatory headache with way too little financial reward for them.

In other words, the-pain-in-the-butt-to-revenue-ratio is not tipped in favor of continuing with the status quo.  Honestly, it's the same sort of decision that led us to reach the same conclusion and get us out of the securities business a few years ago.

Bud Konheim Tells the Poor to Stop Whining

Yes, you read that correctly.

Bud Konheim, the CEO of fashion company Nicole Miller, said on CNBC recently, “We've got a country that the poverty level is wealth in 99 percent of the rest of the world. So we're talking about woe is me, woe is us, woe is this…the guy that's making, oh my God, he's making $35,000 a year, why don't we try that out in India or some countries we can't even name. China, anyplace, the guy is wealthy.”

Mr. Konheim probably just stepped in it…waste deep at least.

But is he wrong?

Not entirely.  Insensitive–perhaps.

I'm sure the cries of inequality will be echoed from the rooftops over his commentary but he's correct for the most part.  In the U.S., you need a bit more than 500k of annual income to be a 1%er.  On a global scale, an income of 34k per year will get you in the top 1% according the stats from the World Bank.



About the Author Brantley Whitley

Brantley is a practicing life insurance agent and has been for over 18 years. After years of trying to sell like his sales managers wanted him to, he discovered that people want to buy life insurance if you actually explain the benefits.

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