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Photo: N/A, License: N/A, Created: 2017:03:16 10:31:45


by Jeff Deloglos

Many studies have illustrated that millennials, gen-xers, baby boomers and the silent generation all prioritize for some type of savings. However, their approach differs based on behavioral biases, socioeconomic status, educational background and attitudes toward sustainable investing. Additionally, each group deems different tools important in measuring its investment choices.

To understand how societal generations differ when handling their wealth, it’s important to note the context of their upbringing.

The silent generation, now ages 75-91, grew up in challenging economic times and war economies. Many experienced high inflation rates, food shortages and lived within their means through frugal convention.

Baby boomers, now 55-74, watched their parents struggle financially in a single income household. The post war economy supported expansion and improved economic conditions.

Gen-xer’s, currently 39-54, initiated the era of the two-income family and rising divorce rates, and latchkey kids became more independent. In this generation, disposable income was used for savings, long-term investment, home ownership and small business ventures.

Millennials, ages 24 to 40, represent the largest and fastest growing consumer generation. This generation is largely affected by technological interaction and prioritize more connectivity with less personal interactivity.

It’s evident that due to these differences, generational groups do, in fact, have distinct outlooks when it comes to investing. A study by BMO Wealth Management, echoes this and reports that people with similar characteristics such as age range, gender or economic background tend to demonstrate similar biases.

OppenheimerFunds conducted research as part of their “The generations project” which pointed to three broad categories that differentiate generations in deciding what is most important when interacting with investments: relationship quality, investment types and performance and added value.

The silent generation, for instance, is less likely to use a robo investing platform but define a relationship quality, as one that involves personal interaction with an advisor, while boomers and gen-xers are likely to have a personal relationship but a growing number enlist an online service. On the other hand, millennials initially prefer robo opportunities but some graduate to a personal advisor.

Investment types is probably one of the hottest topics of discussion. All generational groups, when surveyed, shared in a part of this common interest. The silent generation, for instance, is less likely to use a web-based platform but seek quality in personal interaction with an advisor. Concerns for sustainable incomes and long-term healthcare coverage, taxation and social security issues are reflected in their asset mix including the use of many FDIC products. Most boomers use an online service or the web and their investment goals include planning for retirement, wealth management and business succession. They will also use an actively managed portfolio but are moving into passive index-oriented options as well.

Gen-xers are heading to their highest earning years and choose to research advice before accepting it from an advisor. Many prefer to use passive funds, or an equity-driven portfolio with an appropriate time line. Finally, millennials grew up immersed in technology relationships, however, sustainable investing is a popular concern. This generation is the most socially conscious investor group the market has ever seen and therefore, demand clean energy and technologies.

Performance and value added may be derived from delivery of innovative tools and services. Index funds are increasingly popular with investors. According to Morningstar, a global investment research company, actively managed mutual funds and exchange-traded funds in the U.S. saw outflows of $514 billion, while passively managed funds saw nearly $1.6 trillion in new money from April 2014 to April 2017. New technologies have expanded the industry. Self-directed investing has created large investor pools. Goals such as diversification, risk aversion and cost concerns need to be met. Technologies and those generations who grew up immersed in them have enabled the creation of new investment tools and formats. The silent generation and gen-xers are more likely to use a trusted advisor or discuss investments with family. Boomers and millennials are more willing to add a low cost robo relationship such as Stash or Robinhood to the mix, with fewer conversations with family or an advisor. The popularity of Index investing has added to the growth of this segment and the popularity of low-cost Index Funds and Exchange-traded funds (ETFs), self-directed accounts, and phone advisors are attractive to gen-xers and boomers.

Ultimately, communication to build trust and positive relationships will continue to evolve and less dependence on human interaction will be required. Regardless of what interface works best, diversification, discipline and long-term planning remain bedrocks of healthy investing habits and delineating what is specific to generations presents information data advisors can use to develop best practices for interactions. At the next family gathering look around the room and reflect on how each generation has been influenced by the previous ones. The tools we use today started with ideas from yesterday.

Jeff Deloglos is a trust officer at ESSA Bank & Trust.