Financial advisors want as much information as they can get about younger investors, as they anticipate a huge transfer of wealth from baby boomers to their children.
Millennials are inundated with media coverage, but what about the in-between Gen Xers who have received much less attention?
Global X, an exchange-traded-fund provider, recently studied investors in these two groups, and found several distinctions between and within each one in terms of their understanding of investing and approaches to saving.
Gen Xers, it found, could best be broken down into “cautious consulters” and “knowledgeable Xs,” while millennials were seen as “builders” and “adrenaline techies” based on their investment styles.
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Overall, Global X said in a statement, investment behavior was not uniform across asset levels or age groups.
“We believe this survey can serve as a helpful guide for many financial advisors who seek to better understand their future potential clients and what makes them tick,” said Global X’s research director, Jay Jacobs.
Key commonalities emerged when investors were grouped by age and wealth bracket, Jacobs said. “While the ‘builders’ and ‘adrenaline techies’ are both technically considered millennial investors, understanding their behavioral nuances are essential for an advisor seeking to help an investor better save for his or her future.”
ORC International conducted the retail market survey late in the second quarter with 2,250 Gen Xers (born 1968 to 1979) and millennials (21 years and older, born from 1980 to 1995), with minimum investable assets of $100,000.
Following are Global X’s analysis of characteristics of the millennial and Gen Xer groups and the opportunity for financial advisors:
Millennials with $100,000 to $250,000 in investable assets have just begun to save and invest. Indeed, savings do not yet significantly figure into their financial plans, as they are 26% less likely than other investors to have a plan to save for their children’s education.
Investors in this group tend to be ignorant of some financial strategies, such as smart beta ETFs. And they prioritize low fees over other features of investment vehicles.
In addition, they are 30% less likely than other investor groups to use a financial advisor’s services, and 49% less likely to obtain financial information from an advisor.
Financial advisor opportunity:
- Show commitment to educating these investors on financial concepts
- Help them plan for future expenses, in particular their children’s education
- Become expert in and use digital communication
Wealthier millennials with more than $250,000 in individual investable assets trade frequently — they’re 125% likelier than other investors to trade at least 10 times a month — and they strongly prefer to use robo-advisors and get their information via apps and podcasts.
This group likes ETFs; they’re 38% more likely than other investors to find ETFs appealing and 43% likelier to consider smart beta ETFs in a portfolio. They’re also 28% more likely to grow a nest egg.
However, their frequent trading — trading as a hobby — and strong comfort level with investing in a variety of financial instruments suggest short-sightedness in their quest to quickly acquire wealth and a degree of overconfidence.