Unlike their parents and grandparents, Gen X and Gen Y clients, as well as younger baby boomers, can't count on defined benefits plans that offer both income and predictability. Surveys indicate that younger Americans perceive Social Security's future as dubious. Moreover, the recent economic downturn pummeled their savings more so than that of workers over 50 years old. Given the shift to far more individual responsibility in financial planning, uncertain economic conditions combined with increasing longevity, today's financial services client needs advice and engagement more than any previous generation. Unfortunately, few invest the time to participate in employer-sponsored seminars or even answer the mail sent by either their financial advisors or their 401(k) plan managers.
What makes these generations tick? How should financial advisors speak to them? And how can advisors effectively engage three generations of clients?
MINDING THE GAPS
Pop culture has provided a variety of names to categorize 314 million Americans by age. The vast majority of today's clients are baby boomers, Gen X or Gen Y.
Baby boomers - the largest and loudest generation of Americans, they were born between 1946 and 1964. America's tie-dyed, Pepsi generation numbers nearly 80 million adults with the greatest share of the nation's discretionary income.
Gen X - generally defined as those Americans born between 1965 and 1979. They number an estimated 45 million to 50 million. They could be considered the go-it-alone generation given that they were the first generation to grow up in dual income (i.e., latchkey) households. Being raised during a generally weak economy with an unprecedented divorce rate, Gen X'ers tend to be individualistic, have limited confidence in large organizations and authority and rely on technology more than baby boomers to manage their lives.
Gen Y'ers were born between the early 1980s and early 2000s. Just entering the workforce, Gen Y is the future of both the workforce and financial planning. Slightly smaller than the baby boomer generation they number nearly 70 million.
Market researchers often differ on when precisely one generation ends and another begins, or even the personal qualities that characterize a particular group. For example, there are some baby boomers who may exhibit Gen X behaviors; and even some Gen Y'ers who may behave more like their baby boomer parents. Moreover, the groups are being re-examined and redefined. The baby boomers were traditionally viewed as a single cohort. But can any group that has nearly 80 million people really be characterized with such broad brushstrokes as to appear to be "one thing."
Probably not, which is why some researchers now refer to Generation Jones, the younger baby boomers born between 1955 and 1964. It's simply a recognition that the events that formed the common memories of older baby boomers (Kennedy's assassination, the Beatles) were lost on the younger boomers, who were still in diapers. Instead, their common bonds were informed and shaped by other experiences (like Watergate and disco.)
The generational cohort that a client belongs to is about more than age and life-stage - it reflects the social, technological and economic experiences that have shaped a client's world view. Understanding differences between the generations, and the related behaviors, provides a baseline of critical insights into how to effectively engage clients across the generations. Ultimately an advisor must not only become familiar with a client's history, but also what they have become.
Here are three insights that affect advisor-client exchanges, online behavior and attitudes toward expert advice:
BYTES, NOT BREAKFAST
There has been considerable discussion about the technology differences between older and younger clients. Older baby boomers demanding face-to-face interaction versus the younger mobile generation that conducts business online and live by text message.
While younger clients do tend to be more tech-savvy, successful engagement may be less about understanding technology use than generational learning styles.
Taking a page from a different industry, furniture manufacturer Knoll conducted a study on changing demographics and the future of the workplace to better understand the design of office space and furniture. What they found provides insights for financial advisors as well.
Baby boomers may see meetings as time consuming but critical to getting work done. Conference rooms characterize the boomer workplace - formal places to meet and exchange significant volumes of information in a highly structured manner. Financial advisors frequently schedule "breakfast meetings" with clients as a way to get in business before the workday begins.