It may be fitting that the group nestled between baby boomers and millennials is labeled “Generation X,” since its members are more of an unknown than the generations before and after. Their elders, the boomers, have virtually owned popular culture since the Beatles landed in the U.S. in 1964. Their kid brothers and sisters, the millennials, are applauded for their tech use, social consciousness and entrepreneurial gusto.
As a 2014 Pew Research Center report (“Generation X: America’s neglected ‘middle child,’’’) put it, this generation is like the middle child in a family, underappreciated for how its members behave: hardworking, tech-savvy, intelligent and independent.
(Related: The ‘Middle Kid’ Sounds Off)
Moreover, they have a tremendous need for financial advice as they move through their peak earning years. For this second installment in IA‘s series on generational differences, we asked financial planning industry gurus Kol Birke, Angie Herbers, Michael Kitces and Cam Marston how advisors can “think Generation X” to reach this smart but cynical cohort.
Don’t Look Now, But You’re Being Stalked
Gen Xers aren’t as focused on being “part of the pack” as millennials are, generational change expert Marston told us. “Millennials are more social, more herd animals. They tend to be influenced by what the pack does.”
By contrast, Gen Xers are more likely to learn on their own. They’re comfortable with online research and will study websites and social media to form first impressions. “They want to know, ‘Do I like you? I want to know who you really are,’” says Marston, founder of Generational Insights. “They’re stalkers of people and information.”
Unlike boomers, who had the good fortune to live through years of strong market performance, Xers experienced a tech boom followed by a tech bust, followed in turn by a real estate boom and then a worldwide financial crash, points out Kitces, the co-founder of XY Planning Network, an organization of fee-only advisors who specialize in Gen X and millennial clients. As a result, this middle generation is much less confident about the markets and financial institutions than either boomers or millennials.
In contrast to the axiom “Trust, but verify,” as the president of their childhood, Ronald Reagan, famously coined, Gen Xers believe in “Don’t trust, validate,” Kitces says. “They will vet you in three or four places online, so before they ever meet you they’ll know what you do, what you say you do and how much you charge. If you say something on your website that’s wrong or misleading, you’ll lose their trust forever.”
Many advisors aren’t comfortable being vetted so thoroughly. “It can feel annoying to be challenged,” Kitces says. “But after being burned by 15 years of market stagnation and volatility, Gen Xers want to know how trustworthy you are and what you can do for them.”
Gen X investors lost close to 40% of their net worth between 2007 and 2010, according to the Census Bureau. Those who ignored their investments or had the stomach to “let it ride” learned that good things can come to those who wait, says Kol Birke, a senior vice president and financial behavior specialist at Commonwealth Financial Network. For many others, though, the widespread devastation fed a belief that sometimes nowhere is safe.
This painful experience often makes Gen X reluctant to invest for the long term. In his book, “The Gen-Savvy Advisor: Advising the Generations in the New Age of Uncertainty,” Marston cites a 2016 Transamerica study reporting that four out of 10 Gen Xers still felt uncomfortable with stocks, while almost seven in 10 said they didn’t know as much about investing as they should.
Kitces agrees. Gen X’s fundamental risk tolerance isn’t very different from boomers’, he says, but they are more skeptical about the markets. They may be open to taking risks in a different way, such as by investing in their own business or in real estate.
Too Busy To Admit Needing Help
Investment Advisor columnist and ThinkAdvisor.com blogger Angie Herbers, founder of Angie Herbers LLC, believes that the real “risk” question should be about financial security. By that measure, she says, “Generation X, unlike the other generations, is high risk. Over the past two decades, there has been a surge in business growth, innovation and new technologies across all industries. But the result is that while Gen X is making more than their parents, they are risking more and have less wealth than their parents did at their age.”
According to that same Pew Research report, the average Gen X household earns about $12,000 more than their parents’ household did at the same age, even adjusted for inflation and household size. In other words, Xers are working harder than Mom and Dad did (so much for the slacker myth).