As wealth is transferred from one generation to the next, it’s crucial for advisors to familiarize themselves with the goals, spending habits, and investment expectations of each generation they serve.
One small example is trading habits. While around 70% of Gen Z and millennial investors say they make a trade at least once a month, 50% of Gen X and only 24% of baby boomers do. These differences span various financial goals and are crucial for advisors to take into account to successfully serve each new generation.
To help advisors better understand each generation, from baby boomers to Generation Alpha, let’s break down the crucial things advisors need to know across five generational groups.
1) Baby Boomers: Retirement, Healthcare, Estate Planning
Baby boomers are closer than ever to retirement, yet two in five have no retirement savings. Indeed, 70% are uncertain about their retirement future. Given fewer than 20% of Americans are covered by traditional pensions, boomers entering their 60s this year are taking into account the lifestyle and work changes they need to make it through retirement.
The goals and preferences of baby boomers are more likely to stay the conservative line of wanting to safeguard and grow wealth:
- Low-risk Investment Mix: Slow, low-risk investments to maintain wealth are more important for boomers than riskier, high-growth strategies.
- In-person Communication: Not familiar with digital platforms, boomers prefer face-to-face communication and more traditional offerings.
- Healthcare and Estate Planning: Healthcare plans, including insurance, and executing wills for wealth distribution are top of mind for boomers.
2) Gen X: Financial Strain, Caregiving, and Saving
Take the retirement stress from baby boomers and multiply it by the number of dependent children and parents Generation X has. Due to competing financial goals (saving for retirement vs. saving for kids’ education vs. caregiving for aging parents), 60% of Gen X say money has a negative impact on their mental health.
For advisors, it’s crucial to consider the stressors on Gen X when compiling investment strategies:
- Work-life Balance: For Gen X, juggling all their responsibilities means advisory services should be flexible to meet their varied needs.
- Saving for Education and Retirement: Gen X looks for advisors competent in giving sound savings advice as they seek to support their children’s education and their own retirement.
3) Millennials: Home Ownership, Savings, and Career Advancement
Having entered the workforce right after the Great Recession, many millennials feel they’re in a never-ending game of catch-up. Whether paying off debt or buying a house (26% of non-home-owning millennials are saving for one), millennials are focused on advancing their careers to meet their financial goals.
Millennials are more likely to hop around careers and are technologically versed, making mobility and digital fluency imperative for advisors looking at their priorities:
- Debt Management and Saving: Millennials want to offload educational and other debt while saving for big investments like buying a home.
- Investment Education: Old enough to know about investing but young enough not to feel comfortable with it, advisors have an opportunity to educate millennial investors and build rapport as thought leaders.
4) Gen Z Wanting to Start Off on the Right Foot
While still young in the game, Gen Z is eager to start their careers on the right foot. They’ve lived through difficult eras, including pandemic unemployment, inflation, and increasing debt among their peers. Many Gen Zers say they are “very or extremely worried” about not having enough money.
For advisors, the opportunity lies in offering personalized advice tailored to their unique needs (and delivered in a familiar digital platform):
- Entrepreneurial Spirit: Because of their erratic financial beginnings, many Gen Zers are comfortable and successful in operating a variety of side hustles.
- Digitally Native: Preferring communication on digital channels, Gen Z expects advisors to educate and communicate with them on the channels they’re already familiar with (like social media or apps).
5) Looking Ahead to Generation Alpha
Last but not least, the emerging Generation Alpha is one advisors should start considering, even though most are infants or teenagers years. Why? They are a large potential market that will play a large role in coming years.
Just as with millennials and Gen Z, Gen Alpha is entirely digitally native and will expect its financial advisors to be proficient and engaging on online communication platforms.
In summary, each generation is unique. Advisors who want to succeed in the long term must ensure they’re familiar with the goals and unique drivers associated with each generation. One way advisors can reach each new generation is by going paperless with their onboarding process, freeing up valuable time for the investor and money for their company. Learn more by requesting a demo of Docupace.
