Active allocation: A world of ideas
Our Ivy Live panelists discuss the evolving investment landscape, including the recent U.S.-China trade escalation, and ideas to help guide allocation decisions.
Let’s recognize one thing at the outset: many Gen Xers already have climbed to the top of the corporate ladder – you just might not have noticed. They hold 51% of leadership roles globally and will continue to move into more senior positions.1 And considering Gen X makes up 33% of the workforce2, they are in a unique situation to take on more senior leadership roles – with potentially higher paychecks – as Baby Boomers vacate positions. Even though there are fewer Xers available to step into these positions, Millennials may not have the experience required for the role, giving Xers a powerful place at the salary bargaining table. They have the critical skills necessary to be successful. You’ll want to be there to help them manage the money when it starts flowing in!
While Gen Xers are being promoted and making more money, their financial obligations make them prime for your services. The average Xer has debt of $125,000 (which includes mortgages, credit card debt, auto loans, student debt and personal loans), far higher than the national average of $88,313.3 To make things more complicated, a recent study finds nearly a quarter of Gen Xers believe they can’t save for retirement until they pay off their credit cards.4 These barriers can be addressed with the guidance of a financial professional.
Despite the amount of debt they are carrying, Generation X has goals of reaching financial freedom. Members of this generation are thinking about retirement. Seventy-three percent of them cite retirement planning as their top financial concern.5 And another 37% say they would like to “fully retire” someday, but don’t believe that goal is attainable.6 Of course, considering this generation has lived through not one but two significant recessions, their gloomy outlook makes sense. With your help, they can turn their financial goals into financial reality.
Generation X has a lot on their plates, not the least of which is caregiving. While more than 52% have children living at home7, many Xers are caught off guard when they are also expected to take care of aging parents. Financial planning and retirement decisions often get put on the back burner to take care of more immediate needs. You can help by coaching this busy generation on decisions such as purchasing the right type of life insurance, deciding whether to save for the kids’ college funds or retirement and evaluating if it is better to lease or buy a car. Your financial coaching is invaluable when it comes to juggling Generation X priorities.
After years of feeling overshadowed by Baby Boomers and Millennials, Gen Xers are finally taking center stage. Not only are they poised to become top earners in the coming years, but they are also the only generation to have successfully recovered from the Great Recession.8 While many may assume Xers should be more secure in their future, 61% of Xers are overwhelmed by the thought of providing for themselves and their family in the long term.9 This pessimistic group does have a glimmer of hope, you. Sixty-seven percent of Xers believe working with an advisor can improve their financial peace of mind.10
Even though Gen Xers are facing unique financial challenges, they are amassing wealth. Gen Xers will experience the highest increase in the share of wealth, growing from under 14% of total net worth to 31% by 2030.11 What can you do to attract this challenging yet lucrative demographic?
First, give them peace of mind by preparing them for the unexpected. Seventy-seven percent of Xers stated having financial peace of mind is a top priority.12 When you meet with them, talk about worst-case and best-case scenarios, weigh the pros and cons to calm their fears.
Next, remember this generation wants their advisor to be a resource, not a salesperson or authority figure. Tone down the formality – instead of meeting at your office, meet at a place that is convenient for them. And whatever you do, don’t get defensive if they have performed an internet search for the best ways to meet financial goals or provide a list of last year’s top performing funds. Help them sift through the information and guide, don’t dictate options.
Soon you will find creating small wins will boost their financial confidence and they will feel more secure trusting you with their financial wealth.
1Global Leadership Forecast. (2018). Development Dimensions International, Inc., The Conference Board Inc., EYGM Limited.
2Fry, R. (2018, April 11). Millennials are the largest generation in the U.S. labor force. Retrieved from Pew Research Center.
3Millennials have the lowest credit scores of all generations (2015, July 30). Retrieved from Experian.
4Generations Apart® How boomers and Generation Xers are facing their financial futures. (2018). Allianz Life Insurance Company of North America.
5Generational Research 2016. Financial Finesse Think Tank Research.
6Farook, S. (2018, April 10). Is Generation X Retirement Ready? Retrieved from TD Ameritrade.
7Modern Caregiving. From Aging to Finances to Stuff, Today’s Caregiving is Expanding Past Death. (2017, October.) Legacy Navigator.
8Fry, R. (2018, July 23). Gen X rebounds as the only generation to recover the wealth lost after the housing crash. Retrieved from Pew Research Center.
92017 Allianz Generations Ahead Study – Quick Facts #2. (2017). Allianz.
10Retirement Confidence Dips in 2017. (2017, March 13). Press Release. Capital One Investing.
11The future of wealth in the United States. Mapping trends in generational wealth. (2015). Deloitte.
12Focus on Generation X. (2017) T. Rowe Price.
This information was prepared in part by an unrelated independent third party, BridgeWorks, and is provided for informational purposes only. Ivy Distributors, Inc., believes the information has been obtained from sources considered to be reliable, but does not guarantee the accuracy of the information provided.