Yitz Shapiro was sitting with a financial planner to prioritize his savings and set up investment accounts. But when discussing goals and objectives, the adviser kept pushing him to fund college and retirement accounts. This approach made no sense to Yitz. The fellow was also on a different wavelength when it came to the importance of buying a house. The adviser was not an Orthodox Jew, but as a certified financial planner, shouldn’t he be able to cater to a broad clientele?
Why the significant mismatch between adviser and client?
We’re in Another World
Years ago, when friends or family asked me to refer an adviser who would work by the hour, I sent them to a well-credentialed and highly experienced non-Jewish adviser who used that business model. But I eventually realized how challenging it is for someone outside of our community to guide us financially. Unlike doctors, lawyers, electricians, and plumbers, a financial adviser has to have a good handle on a client’s lifestyle and circumstances. There’s a huge learning curve for outsiders who want to comprehend our finances.
Cost and Timing of Large Families
The list of differences in how we live our lives is quite extensive, and these nuances affect our finances in complex ways. For example, having a large family doesn’t just equal extra dollars required to raise and support more little ones. Since our child-rearing ages may easily extend an extra 20 years, our trajectory of earning capability and spending needs is very different too. This altered financial pathway is a root cause of why financial planning for frum Jews needs to be approached differently.
There are also many misconceptions about frum finance such as the assumption that, on average, we earn less than the general population. But if you look at the numbers, frum Jews of all stripes tend to earn significantly more than the median American household. The source of frum financial challenges is generally on the expense side, not the income side. Making even more money would relieve some of those challenges, but the primary issue is costs that are way above average. Advisers need to get that straight in order to even begin to give our community helpful financial advice.
Another distinction is found in how some frum circles tend to be very entrepreneurial. Entrepreneurs rationally do not want to tie up money in retirement accounts or mutual funds since their businesses require significant capital, which can earn much higher rates of return than mutual funds. At the same time, business owners face unique financial risks which have to be managed. Add in the factor that frum entrepreneurs tend to also have the unusually large familial responsibilities of all Orthodox Jews, and financial planning for them gets incredibly complicated.
Even more than large families or kosher food, the most considerable financial distinction for most Orthodox Jews is probably the need to pay for school tuition. This sizeable financial need is additionally burdened by the fact that it is not tax-deductible. The earnings required to cover tuition often moves families to a higher tax bracket and/or reduces eligibility for governmental support and tax credits. My point is not to complain about tuition costs, but they do make our community’s financial circumstances very different from those of most Americans.
Kollel is Off the Charts
Kollel is another facet of our lives that outsiders struggle to comprehend. This holy but highly unusual arrangement uniquely affects eligibility for government programs and tax credits. Klei kodesh jobs, meanwhile, raise questions about parsonage and qualified tuition reductions, which few accountants and investment advisers have even heard of. Financial planning literature wasn’t written with the kollel or rebbi lifestyle in mind. It’s another way our community is off the charts.
College, No. Simchos, Yes.
Typical financial advisers make a big deal of college planning and tax-sheltered 529 plans to help parents save for their kids’ higher education. For yeshivish or chassidish parents, saving up tens or hundreds of thousands of dollars per child for college is unheard of. On the other hand, we spend big bucks to marry off our kids. Simchah planning is, therefore, essential to us even though it’s not to be found in financial planning textbooks.
Retirement saving may have to wait
Tying up significant money in retirement accounts can be an excellent idea for the typical Joe who gets married in his 30s and has just one or two kids. But for most young frum families, prioritizing IRAs and 401(k)s over buying a house, paying tuition, and making simchos does not make sense. You don’t plan 40 years out while ignoring the here and now. While building a nest egg and long-term compounding are very important, retirement planning may need to be placed on the back burner during years of peak frum expenses.
Home Purchase isn’t an Extra
The typical American gets married much later and lives—even in a purchased home—for just a few years. Buying a home is financially optional if you aren’t putting deep roots down in one spot. Frum Jews, on the other hand, will often spend decades in one neighborhood and strongly desire the social and financial stability of locking in the roof overhead. Pricing pressures also tend to be stronger in frum areas, which is both a challenge—when buying—and a blessing—when selling. Therefore, even our take on housing tends to be different from general financial planning theory.
One Huge Family
In the bigger picture, our familial and communal structures are incredibly unique. Our low-, middle-, and high-income segments are interconnected; in the frum world, billionaires, paupers, and every financial level in between regularly cross paths. This astounding reality has many ramifications for standards of living, costs of living, charity, career options, investment opportunities, and much more.
Mi k’amcha Yisrael? No one.
Even We May Not Get It
My point is not that it’s impossible to get good advice from a non-frum financial adviser. But there are huge barriers to overcome. A more significant issue may be that many of our own finance professionals are trained and influenced by courses, books, and articles aimed at the general population and don’t know how to adapt the general financial theories to our singular, wonderful world. We’re different. Our financial advice needs to be different too.