Gen X needs advisers to help them ride the coming wave

Hit hard by recession, the population continues to lack confidence in investments.
FEB 13, 2014
Generation X is like a surfer poised to catch a giant wave of income and inheritance. But they're hanging 10 without any professional help — and that's where advisers have an opportunity to leap aboard and keep them from wiping out. The great recession dealt a serious blow to Gen X's income and retirement savings but also reduced the generation's use of financial planning firms, according to a recent report by the Insured Retirement Institute. The group also has experienced a big dive in confidence, suggesting a need for financial planning services. And a number of factors stand to make this demographic a lucrative investment for advisers in the coming years, said Cathy Weatherford, president and chief executive of the IRI Members of this generation in virtually every income bracket have suffered a decline in household income since the recession, according to the report. The hard times seem to have lingered. Last year, this group pulled, on average, 14% from its retirement accounts to make ends meet, Ms. Weatherford said. Today, less than two-thirds are saving anything for retirement, down from 72% two years ago. And 42% have less than $50,000 saved up, a jump from less than a third two years ago, according to the report. Other factors have sapped Generation X's net worth as well. For example, many bought homes at the height of the real estate bubble and are also struggling to put kids through college, Ms. Weatherford said. Meanwhile, others are still paying off their own student debt, said Brian Frederick of Stillwater Financial Partners. Even so, the group is poised for a financial takeoff, Ms. Weatherford said. Equities, home prices and employment are rebounding. Plus, many in this group are right on the cusp of their peak earning years, she said. Financial advisers who build relationships with this group early will be well positioned to ride this wave, Ms. Weatherford said. This is especially important since clients are aging, with the typical client topping 55 at the majority of firms, according to a recent survey conducted by TD Ameritrade Institutional. Advisers' first move should be to begin building a Generation X client base. In the past two years, the proportion of this generation shunning advisers has spiked to 77% from 63%. This trend is especially unfortunate because this group could get a great deal of value from professional advice. Only 11% of this demographic professes significant knowledge of investments, according to the study. One result is an excessive conservatism that stifles savings growth. “This group is very risk-averse,” Ms. Weatherford said. “Professional retirement planning could be a real win for them by helping bring them out of that mentality.” For perspective, an investor in her early 30s should ideally be putting nearly 100% of her retirement savings in equities, said Stuart Ritter, a senior financial planner at T. Rowe Price Investment Services. Some, however, aren't putting a dime into stocks. Advisers can add significant value by teaching these clients investment basics, such as understanding that short-term volatility doesn't matter for investments that won't be cashed in for decades, Mr. Ritter said. Additionally, advisers need to help this demographic clearly understand the industry's value proposition, he said. Of those in Generation X who do use an adviser, 40% do so because they want to make sure they are making the correct financial decisions and value a professional opinion, according to the IRI report. “People are often pretty good at handling day-to-day finances,” Mr. Ritter said. “But it's important to get some professional assistance with the bigger items like retirement.”

Latest News

The Stacking Strategy: How Intelligent Allocation Can Create Better Tax Outcomes
The Stacking Strategy: How Intelligent Allocation Can Create Better Tax Outcomes

What if one investment decision could create tax-saving opportunities across your entire portfolio? Chris Vizzi shares how the Stacking Strategy helps investors align tax planning, portfolio construction, and wealth preservation to maximize long-term outcomes while keeping more of what they earn.

AI could drag down RIA valuations, warns Alaris CEO Allen Darby
AI could drag down RIA valuations, warns Alaris CEO Allen Darby

Buyers spending on AI may treat less efficient sellers as overstaffed and price the cost of rightsizing into lower offers

Former Western Asset Management star bond manager fined $3 million
Former Western Asset Management star bond manager fined $3 million

Kenneth Leech pleaded guilty in June to one obstruction charge, and could face six to 12 months ⁠in ​prison.

Morningstar rolls out agentic AI platform built on its research
Morningstar rolls out agentic AI platform built on its research

Launch of Direct AI follows a model portfolio tie-up with Envestnet as advisors juggle AI adoption and private-market due diligence.

Advisor moves: Osaic draws Equitable advisor overseeing $245 million in assets
Advisor moves: Osaic draws Equitable advisor overseeing $245 million in assets

Meanwhile, Cetera's streak of Commonwealth recruitment continues in Washington, and an LPL advisor hops over to Raymond James in Maine.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

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