For example, a study from Global X found that for 87 percent of millennials, also known as Gen Y, their most important expectation of an advisor was protecting their investments during a market downturn. In contrast, 76 percent of Gen X wanted financial education.
This lines up with the observations of Rob O’Dell, certified financial planner with Coyle Financial Counsel. He also lectures on selling financial services across the generations for research firm Generational Insights.
Gen X tends to be very skeptical, he said. They know things don’t go according to plan. They grew up witnessing the Watergate scandal of the 1970s and watched the space shuttle Challenger blow up in 1986. They were often latchkey kids, with more than 50 percent having divorced parents, which led them to become very self-reliant.
“As a result, they want total transparency,” O’Dell said. “With mutual funds, for example, they want to know exactly how much they’re paying in fees at the fund level and advisor level.
“They want their advisors to help save them time and money, in that order.”
In contrast, O’Dell said, millennials — because they grew up so close to their super-involved baby boomer parents — are interested in similar social causes as embraced by their parents in the 1960s and ’70s. They want to make the world a better place, and they invest accordingly.
“These idealistic hippie kids tend to have a more conservative mindset in terms of investing, because they saw the results of the tech bubble, September 11 and the [Great Recession of] 2008,” he said.
Millennials and Gen X have quite different approaches and attitudes, agreed Marcio Silveira, CFP and founder of Pavlov Financial Planning.
“Generation X remembers the ’90s — the robust stock market and hedge funds,” he said. “So they’re more willing to bet on the market and stocks and risky assets.
“They’re less concerned with corporate social responsibility and accept that corporations are here to make money.”
In terms of portfolio planning, it is important to address any overconfidence, Silveira said, especially with those who are now thinking about retirement.
Millennials tend to be suspicious of institutions, the stock market, regulators and corporations, he said, adding, “They think the system is rigged. They expect corporations to be good corporate citizens.”
Millennial clients often try to avoid certain sectors — such as defense, oil, tobacco and alcohol — in their portfolios, he said. In response, Silveira will supplement a core of index investments with funds that take a more actively managed socially responsible approach.
“They seem to be more conservative and less knowledgeable [about investing] than Generation X,” he said. “We need to educate them to be not too risk-averse.”
For his part, Trent Porter, CFP and owner of Priority Financial Partners, finds that members of both generations have similarities: interest in socially responsible investing and membership in what he calls the research culture.
On the investment side, younger clients (age 45 and younger) are asking, overall, for socially responsible options, he said. In response, all of his model portfolios come in two versions: traditional passive funds and sustainably tilted passive funds.