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Viewing Money Through the Lens of Generation

Nov. 15, 2014
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By Jeremy Office, CFP®, ChFC, CIMA

Learn more about Jeremy on NerdWallet’s Ask an Advisor

The psychology of investors and the behavioral aspects of investing have always intrigued me. As a financial advisor, I interact with an eclectic group of people from various generations. Typically, advisors focus on older generations—understandably, because that is where the highest concentration of wealth is. But as demographics shift and older generations such as baby boomers begin to retire, we can really begin to see the generational differences in the way wealth is perceived.

In an initial consultation process, the first step is getting to know your clients and understanding what makes them tick. One aspect we need to understand is what might have influenced their perception of money and investing. I thought it would be interesting to see what some characteristics of the various generations are and how this can affect their views on wealth management.

Baby boomers

This is the generation that is looking at retirement today. The baby boomers were born from 1946 to 1965. The postwar generation witnessed and participated in some of the greatest social changes in the country’s history during the 1960s and 1970s. By the early ’80s the economy had rebounded and the United States entered into one of the longest periods of sustained economic growth since World War II.

During these times, consumerism and materialistic greed left this generation ill-prepared for retirement, as spending exceeded saving during these peak earning years. Fast-forward to 2008: As baby boomers began to reach retirement age, we experienced the largest recession since the Great Depression, and you can understand their concerns about financial security in retirement. Adding to their concerns are our government-sponsored plans such as Medicare, the Affordable Care Act, Social Security and the high price of health care.

Generation X

The following generation is referred to as Generation X, those born from 1965 to 1976. This generation is characterized by growing up during corporate downsizing, massive layoffs and governmental scandal, and they often come from dual-income and/or divorced families. This led to a self-reliant and independent way of thinking.

As the first generation to grow up with computers and remote controls, they are more comfortable with technology than previous generations. From the perception of investing and wealth, Generation X has faced stagnant wage growth and higher levels of debt than previous generations. As far as planning for retirement, they have taken advantage of company 401(k) accounts and began to save at an earlier age, so are more prepared than the previous generation. Some current concerns for Generation X are college savings plans for their children and cash management.


Lastly, we have the generation born between 1977 and 1998, known as Generation Y or Millennials. They are the biggest demographic the U.S has ever seen. Millennials are products of a globalized world that is more connected than ever. As early adopters of social media, and having grown up immersed in technology and connectivity, they value relationships and the possibility of instant gratification.

They also happen to be the most educated generation entering the workforce. With that education comes the highest level of student debt yet seen. With few job prospects, towering student loans and an uncertain future due to having entered the workforce during the recession, they are more hesitant to stay in one place. They are mobile, and rent rather than buy. They value a work-life balance, and experiencing the last recession has changed their career paths—climbing the corporate ladder isn’t something millennials place emphasis on.

In a generation that includes Mark Zuckerberg, who dropped out of college to start Facebook and turned it into a multibillion dollar company, and the rise of app developments that make people rich in a very short time, millennials have embraced entrepreneurialism and look to make an impact in the world. Having seen their parents delay retirement and scale back their spending because of the 2008 recession, you can understand that they’re more hesitant to invest in traditional financial markets (i.e., stocks and bonds). They are more conservative, less trusting, and rely more on digital tools, including social media, to solve financial problems. They are more hands-on when it comes to dealing with their financial situation. As the benefactors of an estimated $15 trillion of baby boomer wealth, they need to be advised on how to handle and deal with such transfers.

According to Michael Liersch, Ph.D., director of behavioral finance for Merrill Lynch Wealth Management, “Millennials are savvy, independent and skeptical; they value expertise, question everything and intend to maintain control of their financial destiny, but admittedly lack a high level of knowledge about investing.”

Getting with the times

Though I have only scratched the surface on generational differences, I think it is important for financial advisors to be cognizant of the different generations. Being able to understand our clients not only builds a stronger relationship, but gives the insight needed to offer better service and value. As with any business, we need to adapt to the times and environment and know the customer.

As wealth is transferred from one generation to another, knowing the mindset of each can be what sets us apart and keeps us from making mistakes and assumptions. Sometimes we should learn from the past to prepare for the future.