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Voices One demand from the generation advisors need most – Financial Planning

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Year-over-year, an increasing number of the most successful RIAs and fee-based advisors say Generation X investors will be their primary target over the next 12 months — and a top driver of profitability for their practice. But Gen Xers have clear preferences that make them unique, especially when it comes to technology, the human touch and the importance of trust.

Generation X investors, ranging in age from 37 to 52, are often overshadowed by older baby boomers and younger millennials. Yet Gen Xers are prepared to surpass both baby boomers and millennials when it comes to wealth creation, economic impact and industry value.

Gen X investors are projected to nearly quadruple their assets to $22 trillion by 2030, while millennials’ assets are expected to reach just $11 trillion, and boomers will be spending down their wealth in retirement, according to a study by Deloitte. And Gen Xers are poised to inherit upwards of $30 trillion.

Gen Xers are a force that cannot be ignored. They are in their prime earning years, surpassing boomers and millennials as the majority of senior managers and decision makers at U.S. companies. They are taking the lead as entrepreneurs, launching more startups and attracting a significant share of venture capital.

While they are achieving success, Gen Xers have experienced hardships which have likely shaped their financial outlook, approach to investing and perception of advisors. Gen X is reported to have suffered the most from the housing collapse in 2007 and was hardest hit during the 2008 financial crisis. And let’s not forget that Gen X college graduates have six times more debt than their parents did at the same age, according to the Pew Charitable Trust.

Despite their growing wealth and complex financial challenges, Gen X investors are the least likely to have an advisor. More than half of Gen X investors (52%) do not work with a financial advisor, with a majority stating they prefer to manage their own assets, according to our latest Advisor Authority Special Report. As they continue to build more wealth and seek to manage the increasing complexities that come with it, Gen X investors present a prime opportunity for financial professionals — especially those who can balance the benefits of technology with the demands for building more trust.

Although coming of age before the internet era, the vast majority of Gen Xers are rapidly adopting digital technology at rates in line with younger millennials. Studies show that more than 95% of both Gen Xers and millennials are perpetual users of the internet, roughly 90% of both generations are reliant on smart phones and mobile technology, and roughly 80% of both cohorts are regularly on social media.

This might lead an advisor to believe that technology is essential for attracting and retaining Gen X investors. Indeed, advisors prioritize tech enhancements such as increased use of social media and increased use of mobile technology among their top methods to attract these investors, according to Advisor Authority. But Gen X investors still say that technology is no replacement for the human touch. In fact, when it comes to building and maintaining a successful advisor/investor relationship, Gen Xers — more so than any other generation — say that trust comes first, technology second.

When Gen X investors choose a financial advisor, experience, personalized advice and using a fee-based fiduciary standard far outrank the digital domain, such as leveraging mobile technology, enhancements to websites and client portals, social media and robo advisors. Gen Xers say face-to-face meetings are the No. 1 method of communication with their advisor, and they say that in-person meetings are by far the best way for an advisor to learn about their needs, priorities and goals. Likewise, for the most successful customer experience, Gen Xers expect quality communication and a personal one-on-one relationship.

Keep in mind that Gen Xers, more than any other generation, say the single most important reason for having an advisor is to help them prepare for and live in retirement. Their top financial concerns also focus first on saving enough for retirement, followed by cost of healthcare and financing their children’s education. When it comes to the factors that will impact their approach to investing and their portfolios, they are most likely to focus on hot-button issues that come straight from the headlines — like Washington politics, Fed policy, global instability and taxes.

In an environment that is increasingly commoditized — and competitive — the most successful advisors understand that the real key to attracting and retaining Gen Xers comes from leading with holistic planning, customized offerings and putting clients’ best interest first.

You need to leverage the best of fintech to remain relevant, keep pace with the rapid rate of change, and outperform the competition. But it is equally important to forge one-on-one relationships, take a hands-on role, and sit on the same side of the table as your Gen X clients — with greater transparency in the fees that you charge, the products that you use, and the breadth of choices that you offer them.

Craig Hawley

Craig Hawley

Craig Hawley is general counsel and secretary at Jefferson National, now operating as Nationwide’s advisory solutions business.

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