For decades, client engagement was about understanding life stages - specifically, the differences between the baby boomers and the World War II generation. As the demographics have shifted, ushering in Gen X and Gen Y, new needs and expectations of a new three-generation marketplace have become more complex. They also have presented new challenges as well as opportunities for financial advisors.

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.

In contrast, younger workers learn in "bytes." They consume as much information as baby boomers but in smaller chunks over time and with far greater reliance on accessing and learning information 24/7 online. Meetings are short and less structured. They focus on collaboration.

Gen Y prefers less formal and engaging places that are more like living rooms and kitchen counters to facilitate quick social exchanges, engagement and agreed action.

"WE" VERSUS "I"
All three generations are online and see technology as critical to their daily lives. What's different is how each generation uses technology to seek advice.

Baby boomers gave rise to the fear in many service professions that new "do-it-yourself" attitudes would erode the role of the experts. This fear was felt not just among financial advisors, but any number of sales teams, including automotive dealerships, travel agencies and retail stores.

While seeking financial information online has not replaced the advisor, it has changed the relationship. Baby boomers tend to use the web to educate themselves . They will seek to learn more about products and then approach their advisor as a consultation to validate what they have learned and follow up with more comprehensive and complex questions than older offline generations.

The "I can do it" mantra is a more apt moniker of the Gen X client. The role of advisor for the consummate do-it-yourself X'er is reserved for complicated planning and trades.

Similar to the boomers and Gen X, millennials use the Internet for initial research. However, they are more likely to seek the opinion of others online. Gen Y'ers are more likely to want to know the experience of others who are like them in addition to the objective information that is most often sought by baby boomers. For younger clients, collaborative decision-making and sharing experiences is the new normal. Financial advisors who can be part of a larger discussion online that is well beyond finance alone (buying a first home, getting a graduate degree, etc.) are more likely to become trusted go-to resources for Gen Y clients.

EXPERTISE AND EMPATHY
Expertise is valued across generations. However, now that so many clients are college educated and information is free, that expertise must be based upon more than graduations and certifications alone.

Baby boomer clients at midlife and older remain researchers and students. They look for advisors who can serve as teachers as well as help them sort through the clutter that is the Internet and the legions of popular advisors on television and radio. For the baby boomers, engagement and education are often synonymous.

Gen X and Y clients look for education as well, but they also look for expertise that can make connections to all parts of their lives. In contrast to the baby boomers, they see all aspects of their lives as interconnected rather than a series of issues to be analyzed and managed. Gen X'ers are looking for tools to organize life and money.

To successfully engage younger Gen Y investors, financial advisors need to provide more than advice on investment but also on those things that money is used for - such as health care, education, caregiving, etc.

Moreover, the ideal advisor must show empathy. To demonstrate that they care about not just their clients' portfolios, but their clients' lives too, advisors will need to learn more about the issues that Gen Y clients care about.

Given their current life stage, most Gen Y financial concerns are about debt and trying to secure a steady income. For many, college loans and associated school debt represent a burden that is both a barrier to savings as well as achieving a desired quality of life. Moreover, the economic downturn and record unemployment has impacted Gen Y greater than Gen X or the baby boomers.

Given Gen Y's current tenuous economic capacity today, banks may be in the best position to invest in long-term relationships with this generation. Gen Y is all about transactions, not savings - paycheck deposits, bill paying, loans, etc. Many banks have invested in online and mobile banking to capture and cultivate a relationship with these young tech-savvy consumers.

Some have gone even further to appeal to this group's desire for convenience by establishing cafés and coffee shops with free Wi-Fi.

Today nearly 50% of workers are baby boomers. Approximately 20% are Gen X and 25% are Gen Y (the remaining sliver is made up of the workers born before 1946). By 2020, almost 50% of workers and investors will be Gen Y, with the remaining 50% being a combination of Gen X and the youngest baby boomers.

A three-generation marketplace will disrupt current advisory models that focus on product, 'face-time' and an analysis alone. Successful practice management will require an understanding of a client's generational experience, expectations and their preferred mode of engagement.

Joseph Couglin, PhD, is the director of the Massachusetts Institute of Technology AgeLab.