Asset managers said to be overlooking Gen Y

NEW YORK — Asset managers are raking in plenty of business from baby boomers but are missing the boat when it comes to boomers’ children, according to a recent report from KPMG International.
JUL 23, 2007
NEW YORK — Asset managers are raking in plenty of business from baby boomers but are missing the boat when it comes to boomers’ children, according to a recent report from KPMG International. “The baby boomers have proved a happy hunting ground for the financial industry over the last 20 years,” said Bernard Salt, a partner in KPMG’s Melbourne-based Australian office and author of the report, “Beyond the Baby Boomers: The Rise of Generation Y.” Indeed, many investment products and sales pitches have been finely tuned to catch the attention of the 78 million baby boomers as they approach retirement. However, that pool of investors will soon begin to contract, leaving many in fund management without a new client base, Mr. Salt said. Relax, he said. As long as financial professionals know how to tweak their approach, they can work with Gen Y, a population Mr. Salt defines as those born between 1976 and 1991. The report also mentions, but does not focus on, the increasing wealth of Generation X, which immediately followed the baby boomers. Coming from a generation of parents who doted on them, many Gen Yers rely on their parents through their 20s and tend to avoid making long-term commitments. Both attributes are perceived as a negative by asset managers. Also, Gen Yers are relatively new to the work force and, as a result, have less in savings, according to the report. Gen Yers also think in a “tribal” manner – they tend to seek input from friends and family when making decisions, even investment decisions, the report said. And while many Gen Yers would benefit from professional help when it comes to financial planning, they tend to view the industry with skepticism. The solution? Rather than wait for twenty- and thirtysomethings to come to them, money managers and financial planners should begin figuring out how to catch their attention. The best way is through their baby boomer parents, Mr. Salt said. “The industry can market through the parents, giving them incentives to set up funds for their twentysomethings,” he added. “It’s prudent for the industry to have a familial relationship with Gen Y,” Mr. Salt said. “It’s a way for them to make a credible connection.” Retirement is too distant a goal for these young investors, Mr. Salt said. “It’s not as important for young people to stress about how much they’re putting away,” he added. “It’s about establishing a good pattern of saving behavior and making the magic of compound interest work in your favor.” Professionals who offer to teach Gen Yers how to save and are easy to get along with are most effective at dealing with the members of this generation, said Michael B. Rubin, a certified financial planner and founder of Total Candor, a financial planning education company in Portsmouth, N.H. “When working with this generation, advisers should establish themselves as an unbiased authority,” he said. “You want to focus on meeting short-term needs first and come across as a cool older cousin rather than a parent figure.” Some companies have already tailored their approaches to appeal to Gen Yers. American Century Investments Inc. of Kansas City, Mo., in November unveiled an investment program aimed at younger clients that includes a $500 minimum on certain funds. The plan, called “My Whatever Plan,” includes a “financial coach” available by phone or online chat. “It’s not about immediate profitability,” said Donna Byers, senior vice president of direct sales and service at American Century. “We want to make connections over time so that we have a relationship with them once they have the discretionary income to invest.” Although they may be saddled with student loan debt and may not understand the concept of compound interest now, today’s twenty-somethings will begin moving into that profitable wealth accumulation bracket by 2016, according to Mr. Salt’s report. “As early as the next decade, Gen Y will start to inherit the baby boomers’ wealth,” he said. “The industry needs to recalibrate its trajectory to avoid being caught wrong-footed by the movement of boomers beyond wealth accumulation.”

Latest News

SEC alts proposals may spark compliance 'culture shock' for managers
SEC alts proposals may spark compliance 'culture shock' for managers

CFP, CFA and CPA holders could gain accredited investor status as regulators weigh wider private market access for advisory clients

Advisor tech platfoms court firms with discounts, notaries, education
Advisor tech platfoms court firms with discounts, notaries, education

DeepVest, Vanilla and Libretto roll out tools to help financial advisors launch firms, close estate plans and sharpen planning skills

When it comes to retirement, Americans struggling with 'permission to spend,' says Prudential
When it comes to retirement, Americans struggling with 'permission to spend,' says Prudential

“People aren't effectively using their wealth in retirement,” said David Blanchett of Prudential.

NFL referee Shawn Hochuli doubles as LPL-affiliated financial advisor
NFL referee Shawn Hochuli doubles as LPL-affiliated financial advisor

Second-generation NFL ref Shawn Hochuli co-founded IWM Partners in Irvine, California, a wealth management practice with more than $500M in client assets

SEC bars NY advisor who allegedly defrauded elderly client of $2.4 million
SEC bars NY advisor who allegedly defrauded elderly client of $2.4 million

U.S. seniors lose $28.3 billion annually as a result of financial exploitation, according to a 2023 AARP study.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains