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In Battle for AUM, Gen X Is Advisors’ Secret Weapon

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The high-net-worth story is increasingly a Gen X story, according to Advicent COO Tony Stich.

HNW clients are the most profitable sector for financial advisors, as well as the fastest growing, Stich said. Most of those new HNW investors, though, are Gen Xers.

(Related: Thinking Gen X: An Overdue Look at an Overlooked Generation)

“What happened for advisors is they were focusing all their attention on baby boomers. Boomers required a great deal of white-glove or face-to-face service,” the COO said. “They were not an efficient customer.”

Then attention shifted to boomers’ children, the millennials, as the industry started thinking about the impending wealth transfer between the two generations, he said.

“Everyone’s thinking, ‘The wealth transfer is happening; we should be focusing on the millennials. How can we make them happy?’ All this time, the forgotten generation, the in-between generation, has been accumulating wealth quietly,” Stich explained.

They’ve been doing that with support from online platforms like Personal Capital and Wealthfront, he said, but that independence is baked into Generation X’s outlook and attitude.

Gen X is “the go-it-alone generation,” the COO explained. “They were latchkey kids. They’d come home from school and both their parents were at work.”

A generation of kids that grew up learning how to make their own snacks and do their own homework without parental supervision isn’t put out by having to plan their own finances — at least not at first.

Gen Xers who started out managing their own finances are now at a point where they want more sophisticated advice from a professional, according to Stich.

“‘I don’t want it a lot,’ they’re saying. ‘I don’t need to engage with a person all that often,’” Stich explained. “They don’t want to be sold. They want to deal with people only when they’re asking for it, but they have a high expectation of the digital side of things because they have been working with robo-advisors so long.”

Access, Not Advice

While the millennials were early adopters of robo-advice, a January paper by Cogent Reports found Gen X accounts for 40% of robo-advisor users and 35% of affluent investors who would consider using an automated platform.

However, financial firms don’t need to offer automated platforms with powerful algorithms to attract wealthy Gen Xers. They main thing they’re looking for is easy access to their account information, according to Stich. They want an online portal and account aggregation, not risk questionnaires and portfolio recommendations powered by artificial intelligence. Firms “must offer a way for that go-it-alone generation to interact with their plan, to log in and see how they’re trending; but they also want that personal touch. They want that semiannual or quarterly visit,” Stich said.

Stich pointed out that Gen X grew up watching the Enron scandal, the dot-com crash and the recession of the early 1990s.

“They saw their parents lose their jobs. They saw their parents lose their homes to bankruptcy. They saw a devastating time financially,” he said. “They are more prone to keeping an eye out.”

Gen X wasn’t spared by the Great Recession, either; the youngest Gen Xers were approaching their 30s in 2008. Data from the Census Bureau shows that Gen Xers lost almost 40% of their net worth in that period.

He added, “They don’t want what happened to their parents to happen to them.” An advisor can be much more effective than a robot in calming those fears.

Unlike millennials, whose loyalty to a fintech provider may not last longer than it takes the page to load, Gen X is willing overlook clunkier aspects of a platform as long as the service is there.

“They want a solid digital experience, but they are forgiving,” Stich said. “They’re willing to make some concessions if they’re getting the right personal advice on their timeframe.”

— Read How Much Traction Do Robo Hybrids Have With Investors? on ThinkAdvisor.