The three generations currently being served by the financial planning profession—boomers, Gen X, and millennials—have similarities, according to the Commonwealth Financial Network article, “Uncovering Investing Trends Across Generations.”
Those similarities include retirement as a top reason to invest, an overallocation to cash, and a preference for equities. But the differences between these generations are important to keep in mind when effectively serving them.
According to Commonwealth, this cohort has reported being “somewhat aggressive” when it comes to risk tolerance. A study by the Employee Benefit Research Institute found that boomers approaching retirement age today are heavily invested in stocks. Boomers are also least likely to have money in target-based funds that change from aggressive to conservative the closer a person gets to retirement.
A Capital Group investor survey found that 92 percent of retired boomer investors say it is important to get and stay invested in the market, and 60 percent of boomers surveyed say they feel positive about their retirement. About 31 percent indicated they have no financial concerns, and 32 percent of boomers reported feeling comfortable about investing.
The U.S Census Bureau found that Gen X investors lost about 40 percent of their net worth between 2007 and 2010. Because of this experience, Gen-Xers are more skeptical about the markets, but they also have an overall higher risk tolerance than their
Fidelity Charitable found that 77 percent of Gen X investors have made an impact investment, indicating they care that their investments have a positive impact as well as a financial return. Meanwhile, 26 percent of Gen-Xers surveyed in a BMO Wealth Management study said they feel satisfied with investing.
A 2016 report released by Toniic, an impact investing community, indicated a strong link between millennials’ values and their investing decisions, and that millennials are driving the trend of impact investing.
BMO Wealth Management found that 26 percent of millennials are saving for a home, 23 percent are trying to build their emergency fund, and 21 percent are saving for a short-term goal like a vacation. About 15 percent of millennials feel stressed and overwhelmed by investing, according to BMO, while 18 percent feel confused and 24 percent
Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at [email protected], or connect with her on LinkedIn.