Protesters in the Occupy Wall Street movement are giving financial advisers something else to worry about: a generation of leery, cynical investors.
As many as 20,000 demonstrators descended upon Lower Manhattan last Wednesday, calling for an end to what they say is rampant corruption in politics and corporate boardrooms. As protests spread last week to Boston, Chicago, Los Angeles and Washington, some advisers were reminded of another period during which economic havoc and unrest ultimately reshaped an entire generation of investors.
“They're going to be the new Depression-era babies,” said Lauren Prince, an adviser with Prince Financial Advisory LLC in New York, which has $25 million in assets under management.
Indeed, tension over the nation's economic malaise — which includes unemployment of more than 9% — is running high. Participants in last week's protest in New York criticized investment banks for their pre-recession sale of foundering mortgage-backed securities while simultaneously making bets against them.
They also called for the passage of the proposed Return to Prudent Banking Act of 2011, which would bring back some provisions of the Glass-Steagall Act of 1933, as well as enactment of the so-called Buffett rule and the creation of a law that would bar former regulators from working for the companies that they once oversaw.
“The bankers on Wall Street should be held accountable for selling ghost assets,” said participant Mary Topper, 21, of Asheville, N.C.
She had been at the park since last Monday and had quit two part-time jobs to make the trip.
Faced with limited job prospects and loads of student loan debt, a number of the younger protesters are deeply skeptical about the financial services industry and the markets in general.
“Pension money keeps Wall Street alive. We are fighting for the American dream; a lot of people did the right thing and can't make any gains in life,” said protester Tiffany Flowers, 33, an organizer with the United Food and Commercial Workers International.
“I care about these young people,” said participant David Intrator, 55, the founder of Strategic Documentaries, a communications firm.
“This is a deeper recession, a cyclical change. People feel obsolete and worthless,” Mr. Intrator said.
Indeed, retirement seems an unlikely prospect for young participants who saw their parents become unemployed during the downturn, and are just trying to find a job and get by.
Protestor Collin Pleasant, 21, said in an interview that his father lost his job and has no retirement savings.
As a result, he was protesting in Zuccotti Park in Manhattan's Financial District because “the upper class is trying to wipe out the middle class; we're here to keep the middle class.”
Ironically, the nation's economic problems appear to be pushing young people toward financial conservatism.
Forty percent of those between 18 and 30 said they would “never feel comfortable investing in the stock market,” according to a recent survey by MFS Investment Management. The survey, which was conducted at the beginning of the summer, also found that 54% of the 232 respondents were “more concerned than ever” about being able to retire when they wanted to and that 59% characterized themselves as savers as opposed to investors.
“If they don't want to invest, they really have to start saving now, but they're not going to get the returns that will increase the bottom line,” Ms. Prince said.
Some young people who have lost jobs have had to depend on their parents' resources, rather than building their own.
“We've had people who have a kid who's unemployed and staying with them,” said Rich Zito, an adviser with Flynn Zito Capital Management, which has $285 million under management. His clients, however, have sufficient assets to allow them to be a “financial backstop” for young people who have yet to establish their own independence.
Still, it makes plenty of sense for a young person to back away from the markets, at least for now, some advisers said.
“I've met people who are over six figures in college loans. What happens when you're stuck with that and no job?” asked Erika Safran, founder of Safran Wealth Advisors LLC, which manages $39 million in assets. “You can't even spell "retirement' with no job.”
Still, while the prospects for prosperity may be dim, not all of the young protesters have lost faith in the markets.
Occupy Wall Street protester Danny Tom, 25, who is unemployed and carrying $40,000 in student loan debt, is hopeful about eventually landing a teaching post and still believes in investing.
“There are always opportunities to be made if you do your homework,” he said. “Regardless of whether it's a bull or bear market, there's money to be made.”
Email Darla Mercado at [email protected] or Ashley Tavoularis at [email protected]
