Many Gen Xers have made major mistakes such as failing to appropriately save for retirement or, horribly, not having any retirement funds.
Attention lately has been focused on the investing habits of Millennials: how they favor algorithms and apps and their tendency towards overconfidence in their understanding investing. Many advisors have turned in a different direction, focusing their attention on baby boomers entering retirement. But, it could be the Generation Xers (those between ages 35 and 50) that need the most help. Gen Xers are in the prime of their earning years, but have the worst financial habits. Many have made major mistakes, including holding too many credit cards, failing to appropriately save for retirement or, horribly, not having any retirement funds. A Northwestern Mutual study noted that 38% of Gen Xers have more debt than savings, compared with 31% of the overall population.
Where Millennials may have mistakenly placed their faith too much in their own investment savvy, Gen Xers have a lack of faith in financial advisors generally. Many blame the financial industry for two economic crises in their earning lives: the dot com bust in 2001 and the economic recession triggered in 2008, and some may have watched parents lose carefully planned retirement accounts due to the markets during that time. Gen Xers are defined as being born between 1965 and 1984, placing them in the range of 17 to 34 during the first bubble burst and 24 and 43 during the second; in other words, that generation may have lacked experience to survive the first bubble and then watched the second bubble burst whatever they had managed to collect.
Other major issues for Gen Xers involve having had children later in life than other generations, impacting the amount of time they have had to save for those children’s education. Gen Xers also don’t want to retire: instead, they want retirement careers.
So what are the major behavioral differences between Boomers, Gen Xers and the Millennials? Millennials are tech-driven, choosing to interact with aps and robo-investing rather than financial advisors. They are also fee conscious, but lack information about investment strategies. The focus on technology may also interfere with Millennials’ discipline (think, rebalancing, setting targets, or anticipating future events).
Communicating with Millennials effectively may mean changing both the content of the message as well as the message medium. Content changes would need to educate this group on financial products as well as the costs for future events (such as children’s education). Medium changes mean those messages may need to be delivered by Skype or other secure aps. Marketing to this group may require more social media, and more social media savvy. More and more Millennials are being messaged to about business ownership as the ultimate goal, which may mean more and more Millennials are contemplating dropping out of an employment situation with plan options. Understanding how to plan for entrepreneurship and prepare budget forecasting could be a real need among this group. Many may see a nest egg as a call to “follow their passion” and start a small business. Instead, Millennials may need guidance on building the nest egg to be just that, a safety cushion.
Messaging to Gen Xers will need to account for the shell-shock from the dual bubble bursts in the 2000s. Just as with Millennials, this generation needs a change in both content and delivery. The change in content will need to focus on stability, trust and focus. Unlike Millennials who place trust in algorithms and aps, Gen Xers need to understand portfolio construction, diversification and balancing. A focus on educating Gen Xers in how the market works, and continues to work even after a correction, may be needed. The change in delivery for this generational group will need to track the message here too. Unlike Millennials, who are driven by convenience, the delivery method for Gen Xers will require much more individual attention.
So, does that mean an advisor has to craft three distinct messages and three different delivery platforms? Hardly. Each group needs to understand fee and cost structures. While Millennials need to understand how trading on their own impacts their nest egg by increasing fees, Gen Xers need to understand standard fee and cost structures and have confidence in what’s presented. A uniform message on costs and fees can be created for both groups (and boomers as well), but delivered in different systems. Millennials might want Facebook live chats with an advisor who can respond to likes and dislikes and comments on a rolling basis, where that same message cold be delivered to small groups of Gen Xers in person.
Both groups also need to increase their confidence and trust in advisors, so that they can make sound investment decisions based on up to date advice. Where as Gen Xers need to trust the advisor as well as the market in general, they might need an individualized email communication from their advisor with follow up phone call. A Millennial might prefer an online tracking system with rolling chat boards to view options and “see” the impact of advice on their choices.
Similarly, both Millennials and Gen Xers are failing to contribute enough to get an employer match. They may be literally leaving money on the table. Instead, some Gen Xers are saving for their children’s education at the cost of their own retirement. Both groups may need projections to understand the cost of missing the match, and again, while the messaging may be similar the delivery platform may be different. Millennials may want to learn this through a responsive calculator or ap, where as a Gen Xer may need to address this one on one. Considering that many, if not most, Gen Xers were still paying off student loans when the 2001 bubble burst, they may fear for their children’s ability to pay off loans.
Factoring in the needs of both groups in both content and delivery will be crucial in making Gen X and Millennials retirement ready.
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