UBS Report: Millenials More Financially Savvy than Reputed

I had a conversation with a Stanford GSB classmate regarding differences in work ethics between, ahem, ‘our’ generation, and the Millenials who have been entering the workforce in the last few years.  His views:  “We worked harder at Stanford than they do today, and we expected a lot less.  We knew we would have to earn our respect when we got to the workforce.  Now they just feel entitled to it.  And they want foozball breaks in the middle of the day to boot.”

But is that a fair view?  I’m slightly (much) more sympathetic to the younger crowd.  My observation at UBS is that the younger set today have a ton of energy, a lot of ideas, and want to be challenged.  In this respect, they are probably not at all unlike the twentysomethings of the 1990s, 1980s, or 1910s, for that matter.  On the flip side, with the boom in the tech sector commanding so much social and employment currency, inevitably we will see the norms in that sector bleeding into other industries as well.

A recent UBS report on Millenial financial attitudes was encouraging.  Substantial percentanges of the Millenial demographic reported that they believe they should work hard and that they will have to; they believe in the requirement of saving for the future; they are actually quite conservative in their investment approach.

My own attitudes toward the Millenial generation is quite optimistic.  I think they are willing to put in the sweat equity to build great lives for themselves and their communities around them.  Their tech savvy will connect far flung corners of the world and help organizations efficiently target communications.  They are smarter and more responsible than they are given credit for being.  Organizatons and leaders from my– sigh– ‘older’ generation, should foster the spirit and capabilities of our younger colleagues.

— Tim Shields, UBS


But Soon I Will Qualify for that Toaster

I have colleagues from UBS who chase points like greyhounds chasing the mechanical rabbit.  Almost every purchasing decision is tied to the question “how many points will I get for this?”  It’s an obsession with so many otherwise calm, cool, and rational people.  Personally I think it’s both a mistake as well a misuse of time (not to mention, a misuse of money).  My main gripe is that rewards system don’t just create loyalty to a single credit card, airline, etc., it’s that they create purchasing decisions where none was imminent.  The points should be a byproduct of credit card spend, not the driver of it.

The other problem with the points system is that inflation is completely hidden.  If a Caribbean cruise that once required 50 thousand points now requires 125 thousand points, that is a real devaluation of your points asset.  And unlike currency inflation, which is the result of a complex series of events and government action, points inflation gets essentially no press, and is just the decision of a small number of people looking to reduce their own liability.  Credit card companies and airlines have considerable incentive to constantly devalue their points, and they’ve done it consistently for years.  And they never go in the other direction, reducing points required for an award.

So color me skeptical on the merits of points-chasing.  I know there exists a whole class of people dedicated to the art, and some of the best probably do figure out how to game the system in their favor.  But for most people, it’s chasing the wind.

— Tim Shields, UBS

Of Ivy League Tuition and Fees

I just read a somewhat depressing news release from the University of Pennsylvania’s Office of Admissions and Financial Aid announcing costs for attending the university for the 2015-2016 school year.  Tuition will increase 3.9%, from $42,176 to $43,838.  Add in books, fees, room and board, and next year will cost an undergraduate $64,000.  That doesn’t even include personal expenses or travel to and from campus.  This is just shocking to me.  When I attended in the early 1990s, the all-in cost was just under $20,000, and at the time that seemed insane.

In Penn’s defense, there costs seem rather in-line with peer universities.  Stanford punches in higher at about $67,000.  University of Chicago comes in at $61,000.  It is just shocking to me that the price tag for college (or at least a certain set of colleges), clocks in at quarter of a million dollars.  To be fair, the universities all seem to go to great pains to explain their financial aid packages, including some generous tuition waiver packages for families earning under a certain threshold.

Is any of this worth it?  Color me skeptical.  At UBS, Deloitte Consulting, and JP Morgan, I’ve seen successful individuals from a wide variety of educational backgrounds.  On the flip side, I know of people who struggle somewhat despite a Penn or Stanford or similar elite education.

A UBS colleague recently told me her daughter was interested in Penn.  Fantastic!  I loved Penn, and even though it is a far different place from when I left in ’93 (I doubt students wait in line today to use PCs in the computer lab), it is still a top level institution where some of the smartest, hardest working students come to live and learn and grow together.  It is a phenomenal institution in a great city.  All that said, I have a tough time saying Penn is so uniquely special that it is not worth considering a lower-priced alternative.  This same UBS colleague’s student as earned a full scholarship to the University of Illinois, as well as a near-full scholarship to Chicago’s Loyola university.

In this situation, I am well aware that the parents are well-paid professionals.  I am not sure if the intention would be to shoulder the whole bill themselves, or if they expect their daughter to borrow and/or work.  I don’t think they know the answer to this, either.  But I couldn’t in good conscience point out that they don’t have some wonderful (and sane) alternatives.  U of Illinois and Loyola are also great schools.  Hard to imagine the long-term difference between Loyola of Chicago and Penn being $200 thousand+.

— Tim Shields