3 Steps for Investment Managers and Advisors to better connect with Generation X / Y Investors

Filed in Asset Management

MFS Investment Management recently conducted a survey showing that Investment Managers need to focus on the needs of investors in their 30′s and 40′s, as a demographic ripe for a new approach.

Introduction:

MFS found in their recent “MFS Investing Sentiment Survey” that investors who are part of Generation X/Y, typically between 30 – 49 years of age, have begun to accumulate assets and have a willing to invest those assets. However, financial advisors and Investment Managers servicing this demographic are falling short.

Advisors are Out of Touch:

MFS found interesting disparities amongst Gen X/Y investors and the financial advisors that service them. William Finnegan, senior managing director of retail marketing for MFS stated:

“… these disconnects show a need for advisors to reconsider how they view their clients, the survey showed that advisors are underestimating investors’ optimism about the future of the U.S. economy. With Gen X/Y maturing… we believe advisors should reassess how they communicate with clients, and what the lasting impact of 2008′s financial crisis has had on investors’ risk tolerance.”

The largest disparities involve what Gen X/Y think are their primary investment goals and how their investment portfolios are constructed between equities and cash:

	What ADVISORS think	What Gen X/Y Investors think
Primary Investing Goal	84% think the primary goal is to grow assets	Only 39% of Gen X/Y investors report “growing assets” as a primary goal
Protection of Principal	9% of advisors think Gen X/Y have a primary goal	22% of GenX/Y have this as a primary goal
US Equities versus Cash	Advisors think Gen X/Y have 50% of their investments in US equities and 9% in cash	Gen X/Y reports 34% equity exposure and 30% cash exposure

Education and Advice Needs of Gen X/Y investors:

Besides advisors who do understand Gen X/Y investors, this demographic also displayed a lack of investment understanding.

In my opinion, this likely stems from little to no education during their formative high school and college educations on the principals of investing.

Gen X/Y investors are making risky investment decisions that contradict how they should be behaving.

	What Gen X/Y Investors THINK	How Gen X/Y Investors ACT
Risk of Inflation	71% of Gen X/Y report inflation as a primary concern	Have 30% of portfolios in cash
Willingness to Take on Investment Risk	36% of Gen X/Y report a net increase in willingness to take on increased risk, more than any other age cohort.	Gen X/Y investors on average had a lower percentage of their portfolios in equities (34%) than older generations (Boomers, 36%; 65+, 38%)
Goal of Retiring	Despite a median 23 years until retirement, 61% of Gen X/Y reported being more concerned about being able to retire	53% of Gen X/Y investors were neutral or agreed with the statement “I will never feel comfortable investing in the stock market”
Need for Education/Advice	42% say their need for financial advice has increased in the past year	45% of Gen X/Y are overwhelmed by all the different investment choices available

Taking Action in 3 Steps:

Advisors and Investment Managers must reconsider how they communicate and market to the up and coming Gen X/Y population, who will be the core constituents for new assets as the Baby Boomers begin to withdraw their assets for retirement.

Discuss with Gen X/Y investors the risks associated with investing too conservatively, given the long timeframe to retirement as well as the likelyhood of higher inflation in the United States.

Create and reassess financial plans, simplifying the overwhelming number of product choices

Provide educational seminars, focused at just the unique needs of Gen X/Y investors

What is your perception of how Investment Managers and Financial Advisors can better communicate with and service Gen X/Y investors?

Posted by Adam Verchinski @ 13 April 2011 3 comments

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Apr 15, 2011
12:29 pm

#1 Adam - EverydayTenacity.com :

One additional data point to consider: According to TD Ameritrade’s client data, ETFs make up roughly 10% of the average Generation X or Y investment portfolio.

You can see this at:
ETFs are “All the Rage” With Generations X and Y -> http://bit.ly/eOos7O
Adam – EverydayTenacity.com´s last [type] ..Round up of Investment Management Firms using QR Codes and mobi tags

May 20, 2011
4:25 am

#2 Charles Borromeo@Free Legal Resources :

Interesting content feed you got here. Though I believe your 3 step action plan will work, it is still best to get advice from Investment Managers, Financial and Legal advisors before taking all the risk. Thank you for sharing this article.

Jun 21, 2011
11:16 pm

#3 van025 :

Thanks for your sharing about 3 Steps for Investment Managers and Advisors to better connect with Generation X / Y Investors,Legal advisors before taking all the risk
van025´s last [type] ..What type of mountain bike should i buy