Thirtysomethings ask: ‘What do we do now?’

Over the past year, at least six young couples have come to investment adviser Susan Spraker in desperate need of financial help. All of them have children, and the wives, for the most part, have been laid off or are stay-at-home moms. The husbands, many of whom were in real estate or financial services, have lost their jobs and are now in positions that pay far less. All of them are dealing with high amounts of mortgage debt after taking out jumbo loans for homes they couldn’t really afford.

“They all had these lifestyles of high expenses,” said Ms. Spraker, whose firm, Spraker Wealth Management Inc., has $60 million under management. “Now they are dealing with the shock of: “What do we do now?’”

The financial crisis and recession have had a major impact across all segments of the population, and the young-emerging-affluent class has not been immune. This group has cut back its spending, is heavily in debt and is more focused on improving cash flow than saving for retirement — at least for the short term. While they are not as conservative when it comes to investing as affluent people in general, they are less tolerant of risk than they used to be. They also consider it important to have a written financial plan, even though they acknowledge that they don’t take enough time to manage their finances.

In a December survey of a group it calls the “accumulating affluent,” Merrill Lynch Wealth Management found that 56% had made some adjustments to their lifestyle in the last year. Half had cut back on personal luxuries such as spa visits, and gym and country club memberships, compared with 43% in the affluent population in general.

The survey also found that 57% of the younger group expressed concern about the effect of the economy on their ability to meet their financial goals.

HIGH DEBT LEVELS

One defining characteristic of the young-emerging-affluent class is debt. Whether because of cheap credit or profligate spending, these people are now carrying much more debt than affluent people overall.

Phoenix Marketing International, which at the request of InvestmentNews looked at Americans 30 to 39 with $150,000 or more of annual household income, or investible assets of at least $100,000, found that they have a debt-to-liquidity ratio of 58%, compared with just 18% for the affluent in general.

“Clearly, [the] younger-emerging-affluent [class] has been impacted most keenly by the deleveraging of consumer credit,” a recent Phoenix report says. “With enormous amounts of debt, these investors will be unable to take advantage of many wealth accumulation offers over the short term, and many will likely have to put retirement planning on the back burner.”

Indeed, when Phoenix asked younger affluent people what their single most important financial goal is, only 23% said it is to “assure a comfortable standard of living for retirement” compared with 47% of affluent people overall. The top financial goal for young people (24%) was “improving household cash flow,” a top goal for only 14% the affluent people in general.

While young, debt-strapped investors may not be candidates for retirement planning right now, Phoenix says they offer opportunities for services targeted at credit management and cash flow planning.

Sheryl Garrett, founder of the Garrett Planning Network Inc., which comprises 300 fee-only financial advisers and planners, tells clients who have significant credit card debt to attend a consumer credit-counseling session. Once they’re on the road to recovery, it helps if financial advisers check in with couples monthly to see how they are doing with managing their expenses, she said.

In the Phoenix survey, 59% of respondents said they were willing to take on “calculated risks” to make money, compared with 51% of the affluent market overall. When asked to describe their investment approach, 82% of the younger respondents chose the words “moderate risk” or “risky,” compared with 72% of the total market.

David Thompson, managing director of affluent-market research for Phoenix, said the gap between the young affluent and the total market has significantly narrowed from five to 10 years ago. “The risk profile has become much more conservative,” he said.

Nearly 48% of the young affluent believe it is important to have a written financial plan, compared with 38% of the total market. But 41% say they don’t take enough time to manage their finances, compared with 33% of the total market.

Salesforce.com senior account executive Don Readhimer, 35, who travels frequently for his job, said before hiring Rick Salmeron as his financial adviser two years ago, he rarely looked at his portfolio. Mr. Salmeron is president of Salmeron Financial Network Inc., which has $30 million under management.

“There’s just very little time,” Mr. Readhimer said. “The only time I looked at my investments was during tax time or when we needed the money to do something like buy a car or take a trip.”

Mr. Readhimer and his wife, Anne, also 35 and a food technology director at Yum Brands Inc., have no kids as yet, earn about $400,000 a year, have $260,000 in their 401(k) plans, other investments totaling $340,000 and another $100,000 in their bank accounts, Mr. Readhimer said. They also have mortgages totaling $326,000 on their home, which was purchased six years ago for $380,000.

Mr. Salmeron has found that clients like the Readhimers appreciate the financial planning services he can offer. “My younger clients value time — a lot,” he said. “It’s a huge value to them, because it’s so scarce.”

Lyman Jackson, president of Jackson Financial Advisors Inc. in Newton, Mass., knows that only too well. When he decided to target an emerging-affluent clientele, many of them young parents with children, he realized he would have to make some concessions in light of time constraints.

To accommodate his clients’ busy schedules, he spends a lot of time driving to their homes, staying late at his office for after-work meetings, or arranging meetings in the early morning. And, of course, he often has to call clients back, if kids are screaming and yelling in the background.

NEED FOR FLEXIBILITY

“It’s not a 9 to 5 job, let’s put it that way,” said Mr. Jackson, who oversees $12 million. “Sometimes I go to their homes, and I meet with them around their dining room tables. You have to have a tolerance for kids, but it’s interesting, because it gives you a window into how they live.”

Just a few weeks ago, in fact, Mr. Jackson went to the home of one of his clients who lives outside Boston, to deliver an updated life insurance policy — worth $1.5 million — that does a better job covering a $340,000 mortgage, plus the future education expenses for their two young boys, ages five and eight.

For the client, who together with his wife makes about $400,000 a year, has a net worth in excess of $750,000, and carries no debt outside of the mortgage, the flexibility and the family-friendliness that Mr. Jackson offers have been key during their two-year relationship.