Today’s workforce is composed of a fairly even distribution of workers across different generations. Mostly comprised of baby boomers (or boomers), Generation X and millennials, each of these generations has been shaped by different economic events that, in turn, have influenced their financial attitudes and beliefs. From New York to Perth, from hiring financial advisors to doing their own research, generations have different ways of approaching wealth management.
Understanding the attitudes of each generation when it comes to financial decisions is important for financial advisors. This allows them to truly know where their clients are coming from and find the solutions to help meet client goals.
Born between 1946 and 1964, baby boomers (or boomers) lived through the economic boom following the end of World War II. With extensive government subsidies in education and housing, they grew up in a period of affluence. This allowed them to feel comfortable with their finances and optimistic about retirement.
A study by the Employee Benefit Research Institute discovered that with their wealth, boomers are aggressive when it comes to financial risk. As they approach retirement, they are more heavily invested in stocks. This poses a risk, as boomers leave their savings vulnerable in the event of a market downturn. They also hold alternative investments like hedge funds and private equity.
Generation X, those born between 1965 and 1980, is defined as an “in-between” generation. They lived through the stock market crash of 1987 and the early 1990s recession, and their earnings power and savings are also compromised by current economic situations. Members of Generation X are typically established professionals and entrepreneurs and are at their peak-earning years. They often also receive a major transfer of wealth from their baby boomer parents.
When it comes to financial decisions, they are more sceptical about the markets, but they have a higher risk tolerance than their millennial counterparts. They also balance taking on greater risk and maintaining their current portfolios. However, they are less keen on going to a financial advisor for help, choosing to act based on peer reviews. Gen X members are also tech-savvy, using technology to monitor their financial activities.
Born between 1981 and 1996, millennials went through the Great Recession of 2008 and record-high interests for properties. They are more discerning when it comes to financial decisions, whether it’s building an emergency fund or saving for a home.
Since some of them are just starting a family while the youngest members of the generation are just starting their careers, millennials take a more conservative approach when investing. Despite their conservatism, millennials are enthusiastic about their portfolio outlooks, according to a survey by Legg Mason.
Since they’re born at the beginnings of the Information Age, millennials are more receptive to managing their finances using varied technologies. They budget and plan using apps on their mobile phones and are more open to recommendations by artificial intelligence. Millennials are usually also more interested in environmental, social and governance investing compared to boomers and Gen X-ers.
There are significant differences when it comes to how different generations spend, save and invest. By understanding financial attitudes and beliefs, financial advisors can help meet their clients’ goals, no matter their generation.