Gen X/Y: Advisers just don't understand

Advisers and Generation X and Y investors aren't seeing eye to eye on investment issues. Investors 46 and younger are more optimistic about the economy but less risk-tolerant than advisers expect, a survey by MFS Investment Management has found. For example, young investors are less likely to see domestic and international equities as good investments despite being less worried over the possibility of a stock market downturn. For example, just 5% of the 596 surveyed Gen X and Y investors with at least $100,000 in investible assets think a major stock market drop is a big concern, yet 20% of advisers think it's an issue for younger investors. And 72% of 612 licensed financial advisers think domestic equities are a good place to invest, yet only 35% of investors agree. Similarly, 60% of advisers think international stocks are an excellent or very good place to invest, yet only 22% of investors concur. Advisers are underestimating investors' optimism about the U.S. economy over the next five years, with 35% of advisers reporting that investors are optimistic compared with 47% of investors reporting being optimistic. When it comes to risk tolerance, three-quarters of surveyed advisers believe that investors have become much more or somewhat more risk tolerant over the past 12 months. However, only 15% of investors report an increase in their willingness to take on more risk. Sixteen percent of advisers perceive that investors have become more risk-averse in the past 12 months, while 26% of investors reported they are less willing to take on risk to achieve higher returns. As for the reasons to invest, 89% of advisers think gaining assets is the primary goal of Gen X/Y investors, while only 39% of investors agree. Less than 10% of advisers think Gen X/Y investors have a primary goal of protecting principal, while 22% of investors said the same. “With Gen X/Y maturing and boomers approaching critical decision points for retirement, we believe advisers should reassess how they communicate with clients,” said William Finnegan, senior managing director of retail marketing for MFS.