Practice Made Perfect: Re-Assessing Generations X and Y

Female-AdvisorsOriginally published in FSIVoice.

Generation X has come a long way from its days as the “Grunge Generation.” Hard as it may be to believe, the skeptical twenty-somethings of yesteryear are now leading companies, moving up the partner ranks at law firms and going into private practice as physicians. As these younger professionals become more focused on their financial future, now is a good time for advisors to take stock of the factors impacting the way this generation thinks about capital markets, retirement saving, and other financial issues, and re-assess how to build the relationships that will enable Generation X to look ahead with confidence.

Just as importantly, Generation X can provide a useful window into how their younger siblings, the even more technology-oriented Generation Y, view the financial world today and how those views may continue to evolve. As we approach what many in the industry are referring to as the “Great Generational Wealth Transfer” — an expected shift of approximately $30 trillion from the Baby Boomers to their heirs over the next several decades — understanding today’s younger investors will only become more strategically vital for advisors.

More than Just Social Media
One message that advisors have heard loud and clear about Generation X and Y investors is their greater reliance on technology relative to earlier generations. In developing a clear view of how to work with these clients, however, the role of technology is only one aspect of a larger picture. Spencer Hall, Managing Partner of Retirement Planning Services in Knoxville, TN, says that Generation X and Y ultimately want the same thing as Baby Boomers or retirees: A personalized experience with a dedicated and knowledgeable financial advisor that is attuned to their needs and has their best interests in mind.

“Even though these are different generations that may engage with the outside world differently, when it comes to investing, 25-year-olds and 55-year-olds are pretty similar,” says Hall, 34. “Sitting down face-to-face with an advisor who has weathered multiple business cycles and helped clients across all segments still has value, regardless of age.”

David Williams, President of firm Williams Financial Group in Dallas agrees. In fact, he says the role of the financial advisor will only become more important in the future, despite the continuing progression of technology and widespread access to financial information.

“Investors — younger investors especially — are inundated with financial advice due to the wide availability of information that can be found online,” says Williams, whose firm serves approximately 265 advisors nationwide. “More than ever, they need a capable professional who can make sense of it all and help them to establish a plan.”

Providing Reassurance, Building Relationships
Many advisors have seen success with younger client segments by tailoring their services to the unique generational concerns and experiences of these investors. For example, some have made a concerted effort to talk about issues that are especially relevant to today’s younger and rising professionals, such as managing debt, Williams says.

With the average college graduate now leaving school with more than $25,000 in student loans, and many American households still struggling with high levels of credit card debt, many younger investors are beginning to take greater ownership of their finances — especially after the financial crisis. Not surprisingly, they have also become more serious about financial planning overall, making considerable strides toward creating a more comfortable retirement, building intergenerational wealth, caring for aging parents and saving for their children’s education.

Complicating matters for Generation X is the fact that the cost of educating their children has skyrocketed at exactly the same time that many are taking a larger role in caring for their aging parents. This phenomenon has prompted many to call Generation X “the sandwich generation,” because of the pressure created by rising education and health care costs. “Five or six years ago, this group was all about spending money,” says Williams, 37. “But, now, as many of us are beginning to take the lead role in caring for our parents, and with our own kids getting older, financial and college planning are starting to come more into focus.” Williams notes that helping members of Generation X develop a stronger understanding of various financial instruments and how to employ them to achieve their goals can help many such investors build confidence in the capital markets after the extreme volatility many of them have encountered during their professional careers.

Engaging Early to Ensure Continuity
Brian Kovack, Co-founder and President of Kovack Securities, says he has witnessed a trend toward getting children and even grandchildren involved early in the intergenerational wealth transfer process. “In the past, that may have been a one-way conversation between an advisor and the head of a household,” says Kovack. “But increasingly, advisors are finding that it makes sense to involve the entire family.”

He says this is the right thing to do for the client and their family, but it is also good business, because it allows advisors to establish relationships with younger investors who otherwise may be likely to change advisors upon assuming control of the assets.

Advisors can also help younger investors by taking a more active role in their community. FSI has helped on this front through its work with the Jump$tart Coalition, a non-profit organization that promotes financial literacy among young people. Many members of Generation Y in particular are experiencing justifiable anxiety about their financial futures given the continued weak job market and ongoing volatility in the capital markets.

But ultimately, the most important role FSI can play in helping younger investors is by doing what it does every day, Kovack says. “By helping establish a regulatory framework that allows advisors to work seamlessly with investors, FSI is helping every client segment, including Generation X and Y.”


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