Generation X is the undersized cohort of people wedged between far bigger generations: their boomer elders and their millennial successors. Nevertheless, they have disproportionately more investable assets ($7.2 trillion) than any other age cohort. They’re also considered more reticent and self-reliant than the gregarious baby boom generation that preceded them, which may explain why many financial advisors have overlooked the opportunity to serve this wealthy class of investors.
This is one of several conclusions from a recent survey by Weber Shandwick. The study indicates that not a single financial services company that segments its websites by generation (about half of those examined) focused on Generation X. Yet the study also finds that this generation of 60 million people, compared to 67.9 million millennials (which were defined as people born between 1981 and 1996; the U.S. Census Bureau, which defines millennials as those born between 1982 and 2000, counted 83.1 million as of June 2015) and 74.9 million baby boomers, is increasingly worried about financial security, particularly in the aftermath of the Great Recession.
No wonder why: They’re in the middle of their lives, a time busied by bustling careers and families. Many of these wealth accumulators also have accrued substantial money. At least 4.2 million people between the ages of 34 and 50 have at least $1 million in investable assets, according to the July 2014 Shullman “Luxury, Affluence and Wealth Pulse” study, although other Gen X families have much more. As their wealth increases, they’re becoming more concerned about protecting it.
Working hard to give this generation the security they seek is Ginny Biondi, a producer at Avon-Dixon Insurance Agency in Easton, Maryland. “Many middle-aged people, particularly those in this cohort, are suddenly mindful that their wealth has increased significantly, and with it their risks,” says Biondi. “Yet they’re so involved in their lives and work, they don't realize that the insurance products they purchased when they were young may fail to address the financial exposures they now confront.”
Growing Wealth …
Regardless of their generation, all affluent individuals are concerned with how to manage their growing wealth. But for Gen Xers, their tendency toward self-reliance and modesty may get in the way of asking for advice.
For instance, while 61% and 58% of millennials and boomers, respectively, say their generations are “unique,” only 49% of Gen Xers feel the same about their own cohort, according to a June 2014 survey by Pew Research Center.
They also stand out for their hesitancy, with 44% saying they are not confident about having enough money for retirement, compared to 40% of boomers and 35% of millennials. “They’re skeptical and self-reliant [and] not into preening or pampering,” the Pew Research Center characterized Gen Xers.
They’re also willing to dig into their wallets for a good time, with more affluent Gen Xers spending $8,458 on travel annually. This equates to a per-day average expense of $627, the highest of any other cohort, according to the luxury travel agency network Virtuoso.
Biondi agrees with this finding, adding, “They’re also beginning to buy things they couldn't afford when they were younger, such as art, jewelry, classic cars and fine wines. In many cases, they now have second and even third homes.”
The National Association of Realtors 2015 Home Buyer and Seller Generational Trends Report affirms Biondi's assertion, pointing out that one-quarter of individuals born between 1965 and 1979 are either scaling up their current abodes or purchasing a second home.
… and Growing Risks
As Generation X wealth accumulators invest in homes and other valuable possessions, the risk they face rises as these items may incur damage, destruction or theft. Homes are subject to fire, as well as flooding, storms and other adverse weather-related conditions, particularly vacation residences along coastal areas.
Liability for injuries that occur at the homes rises, as does so-called vicarious liability from defamatory or libelous activities on social media. Unlike baby boomers, whose kids are generally grown, the children of Gen Xers may still live at home (in addition to their ailing parents), posing current and ongoing threats to their accumulated wealth.
Wealth accumulators may also want to hire domestic help, which exposes them to a hornet's nest of potential employment liabilities, including harassment, workers compensation and overtime. Employing domestic staff, buying additional homes and pricey items, and raising families dramatically widens their risk profile. Yet many in this generation are inadequately protected by proper insurance coverages at suitable financial limits.
A case in point: Gen Xers generally fail to carry sufficient personal liability insurance coverage, retaining more personal risk than any other generational cohort, according to a UBS “Investor Watch” study. Like other generations, they also tend not to purchase satisfactory financial limits or umbrella insurance.
“An example to illustrate this point is a car pool scenario with an accident,” says Biondi. “They drive their children and their friends to lacrosse practice and get into an accident. The children are injured, the accident exceeds the auto insurance limits, and now they need to rely on an umbrella policy to cover the difference.” If they don't have an umbrella policy, Biondi warns, “they are paying out of pocket with the potential for future earnings to be tapped, depending on the severity of the accident and injuries.”
If they do have an umbrella policy, she adds, “They’ll buy it with only a $1 million limit, which is not enough for someone of their accumulating wealth.”
The time has come to give Generation X its fair due. They are today's wealth accumulators and spenders, and they’re leaders in their communities and at the businesses where they work. They’re juggling families, debt and a passion for fun times with the need to secure their hard-earned assets. They need both trusted financial advisors and insurance advisors to step in with advice they’re not likely to solicit on their own, cementing the foundation for a valued relationship extending well into the future.
--- Read "For Advisors, This Year’s Disruptors Will Likely Be Next Year’s Standards: Cogent" on ThinkAdvisor.