New study reveals stark differences among baby boomers

Younger boomers appear to be less comfortable with financial advisers than older ones

Dec 19, 2012 @ 3:26 pm

By Andrew Osterland

Baby boomers, the roughly 78 million Americans between the ages of 48 and 66, are the meat and potatoes of the financial advisory industry. They control the bulk of investible assets in the country and constitute the core of most advisers' book of business. But not all boomers are created equal.

In fact, according to a study by Cogent Research LLC, there are stark contrasts between older and younger members of the boomer generation that advisers and asset managers should be aware of.

“The financial services industry has spent the better part of a decade treating boomers as a single and cohesive group,” said Meredith Lloyd Rice, senior project director at Cogent. “However, these new findings suggest companies need to take another look and potentially separate how they are addressing the ongoing needs of investors who are today between the ages of 48 and 56 versus how relationships with older boomers were managed leading up to their retirement.”

For one thing, younger boomers are less comfortable with financial advisers. The survey of 4,000 affluent investors across different age groups found that 63% of the younger boomers had financial advisers compared with 66% of the older members of the generation. The younger boomers are also a lot less confident in their advisers. Just 33% of the younger boomers said they were highly confident with their advisers, while 44% of the “first wave” of boomers — those between the ages of 57 and 66 — said they were highly confident. The older investors had an adviser managing more of their assets, and 69% of them said they were satisfied with the relationship versus 58% for the younger group.

“Younger boomers are skeptical of the investment returns they can get and whether financial adviser fees are worth it,” said Ms. Rice.

The biggest difference between the two groups is that 57% of the older boomers are fully retired or working part time, compared with 12% of the younger ones. Not surprisingly, the older investors are less tolerant of risk, with the average first-wave boomer now putting 42% of his or her assets in low-risk investments and 14% in high-risk investments.

Second-wave boomers had 34% of their assets in low-risk assets and 19% in high-risk assets. Nevertheless, the risk profile of those younger boomers is probably more conservative than that of the older boomers and the “silent generation” (aged 67-87) at the same stage of their lives, said Ms. Rice.

The overall profile of the second-wave boomer is more akin to younger Generation Y investors: they're more skeptical, less confident with and less loyal to their financial advisers. In other words, they are a bigger challenge for financial advisers.

“Advisers need to give younger boomers more attention and determine how their needs are different from older clients,” said Ms. Rice.

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