Gen X/Y: Advisers just don't understand

Advisers and Generation X and Y investors aren't seeing eye to eye on investment issues
APR 03, 2011
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. And 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, but 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, 75% 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. “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.

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