Chapter 6
The Generation X Client
Generation Smarts: Working with Gen X Clients
John Cusack. Kurt Cobain. Singles. The O. J. Simpson trial. This antiestablishment generation of skeptics is 45 million Americans strong.1 Generation X are individuals born between 1965 and 1980,2 meaning in 2015 the first members of this generation turned 50.
They are the original grunge, flannel shirt-wearing latchkey kids. They remember the days before the Internet. They are the last generation of our society who is not born a technology native.
They are also deeply misunderstood and often forgotten, being both a much smaller and much shorter generation (only ∼15 years) than the Boomers and Millennials they are squeezed between. Generation X is referred to as and often feels like society’s neglected middle child,3 and as a result they are a quieter and often overlooked generation.
Gen X’s introverted nature is one part driven by their pessimistic view of the world and by the lack of a mirror from society. There is very little attention from media or business in trying to figure out these individuals, or at least compared to the obsession we have with the generations who bookend it.
Baby Boomers were hippies out to change the world. The Millennials after them have managed to make nearly every company and workplace, trying to reach them as consumer or employee, bend over backward for them (quite reminiscent of their helicopter parents).
However, like the X variable they are named for, this generation is unknown. Try to get through a day without reading a news headline or a work-related conversation about Boomers or Millennials, and you’ll find it is tough! Now try the same exercise, listening in the media or our workplaces for cues about Gen X. Where Millennials and Boomers are seen as heavily contributing to the outcome of any situation: a presidential election (“Millennials feel the Bern”), the retirement crisis (“Crisis building as Boomers begin retiring”), and so on, it is hard to find evidence that Generation X is viewed as contributing the same impact in ways our society, political climates, consumer behaviors, and workplaces evolve.
As much as they are often overlooked or unknown to companies, marketers, and demographers, they are also a little unknown to themselves. Receiving little feedback from the world coupled with a society that tends to be dismissive of them, Generation X lacks a mirror beyond the negative stereotypes and has struggled to define themselves, get a sense of their needs, or to learn how to ask for help.
Previous generations and those who come after Gen X tend to be steeped in optimism. From scandals, inflation, world crisis, and recessions, Gen X’s formative years left them with plenty of reasons to justify the pessimism that many feel they were just born with.4
Labeled slackers and loners, this generation defied society’s low expectations of them and succeeded in becoming responsible citizens who today solidly contribute to their professional and family lives.
This generation didn’t look for trophies and validation. Rather than wait for someone to show them the way, they chose to go it alone in the sense of creating an edgy attitude and tough persona. When the topic comes to their finances, however, their propensity to go it alone, skepticism, and hesitancy to trust are hurting them in a big way.
You can always find proof to support what you want to believe and this is true for Generation X. This generation pushed through the church scandals and the divorces happening all around them in their childhood and adolescence. As life went on, things were looking up and their perseverance was rewarded.
In the early 2000s, as this generation was entering its 30s, they felt more enthusiastic about life and things around them seemed to be going well. The stock market hit new highs and buoyed their psyches with the promise of new and innovative technology companies. In their personal lives, Gen X was settling down, building families and professions. Many of them started to see their earning power and dreams materialize when the Great Recession hit.
This generation took it particularly hard, feeling not only the pain to their savings account, but the sting and old feelings that if there was one thing they could count on it was that things fall apart. It was the proof they needed to validate their cynicism and their belief that what feels too good to be true usually is.
Generation X was familiar with scandals and crises, but this time it was different. Growing up, bad news was mostly the headlines and a sign of the times that informed their psyche. This time it was personal. The Great Recession hit their savings and sense of well-being. From bailouts to the decimated 401(k) and savings accounts, Gen X used the crisis to refuel its pessimism and antiestablishment ways, and here is some of their evidence:
- Many Gen Xers bought homes just before the real estate crash. A recent Zillow study points to Gen X being more underwater in their homes than other generations.5
- Having bad timing in the housing market and the subsequent drop in prices was compounded by the stock market losses they faced and other lingering debts like student loans.
- Cam Marston’s research shows that between 2007 and 2010, Generation X lost 45 percent of their wealth and their median net worth dropped from $75,000 to $42,000.6 While these balances may seem insignificant to financial advisors who have minimums of $1M or more as a starting point, it’s easy to extrapolate the effect on larger portfolios and on Gen X’s fragile psyche.
- Richard J. Hagen’s firm TradeKing conducted a study in September 2014 that showed investors aged 18 to 44 are the least likely to speak with an investment advisor—66 percent of the respondents were Gen X investors. His study also showed the top three reasons holding these potential clients back were cost, trust, and fear of judgment over their financial position and limited knowledge of finances. Richard reframes the last point as an interesting rhetorical statement: “I feel guilty I don’t have a better handle on this critical area of my life!”7
- A study by TransAmerica says only 12 percent of the Gen X investors they surveyed feel that they have fully recovered from the Great Recession.8
The Great Recession caused many of these investors to retreat and it happened at the worst possible time. A study by Greenwald and Associates9 found that the majority of Generation X has not calculated what they need to save for retirement.
It would be easy to, but we should not paint this generation’s lack of planning with the same brush of laziness or apathy they tend to get painted with. The lack of a plan seems to be much more a product of fear and not knowing how to get started than not caring.
The Greenwald study shows that this generation believes saving for retirement is difficult, with 65 percent stating that they believe it’s harder for their generation to save than it was for earlier generations; 48 percent feel like they are behind on their savings plans and only 43 percent feel satisfied with their current financial situation.
Each finding points to an opportunity for financial advisors to tap into these needs and guide this generation to better outcomes. It’s also a call for advisors to put aside their bias that this generation is apathetic, difficult to work with, or not valuable as a client.
While often overshadowed and overlooked, Generation X investors deserve the attention of advisory firms and our industry. They are actively thinking about retirement, saving, and investing, and they want to engage. They are in their prime earning years and they need your help to take the first steps or validate and help them to cement their plans.
They also make good and loyal clients once you can get through to them and gain their trust. Amy Lynch’s work concludes that Gen Xers “put their faith, not in groups, but in individuals.” She notes that Gen Xers will be your toughest prospects, viewing any solution skeptically, asking the toughest questions, and welcoming or provoking conflict rather than easy consensus.10 But once you have passed their muster, this Generation, like Lynch observes, will tend to put their faith in you. This is an excellent foundation for a long and loyal client relationship.
Despite all their skepticism and often gloomy outlook on the world, despite the ways they’re overlooked, paying closer attention to Generation X is a smart idea for advisory businesses to pay attention to and build a critical bench of clients as both the heirs of Matures and Boomers and wealth creators in their own right.
Here are some reasons to believe:
- It’s their time: Generation X is in leadership positions or on deck for senior positions in their firm and careers. They are earning and consuming more, buying homes, raising families, and getting serious about their finances. They are also the generation before the Millennials and poised to be significant inheritors of parent and grandparent wealth.
- They need help and guidance. Whether it is investing their own earnings or inherited funds, this generation needs strategies to plan for a sound retirement and the financial security that they crave. They need help with investing strategies and also, because they are in these peak years of balancing so many priorities, they also need strategies for college savings, managing the care of their children and parents, and estate planning—particularly insurance. This generation will also need your help navigating savings gaps, whether it is the burn of the recession, their propensity to be slow to save, or their general hesitancy.
- They are good clients. Generation X will make you work for their business and their trust. They can be incredibly frustrating as they research and kick the tires of your business. This generation is the ultimate slow yes. Generation X will thoroughly investigate any product or service they are considering, and what makes interaction with them so frustrating is how they push aside your help and desire to shepherd their evaluation process. This generation is not interested in the value proposition you spent hours crafting, PowerPoint slides, or sales pitches. They prefer to go about making big decisions as they’ve managed most things in their life—alone. They are online sleuths and will google you, seeking both online and off-line peer reviews. Generation X is the juxtaposition of a generation that seeks companies and people to be honest with them while simultaneously thinking that few will. The financial services industry, with its low trustworthy scores in general, has a lot of wood to chop to win over this generation. If you can get past their guarded demeanor with lots of straight talk and giving them space to make their assessments and come to their conclusions, it’s our experience that Gen X clients become clients for life. They are loyal, they trust their process and decisions, and they are unlikely to challenge you as much as they are to relax in the confidence of their decisions.
Help Them to Visualize Success
It’s hard to plan and achieve your goals without having a clear picture of success. This generation is adept at visualizing what can go wrong. In fact, that’s their starting point and it’s why Gen X needs your help to visualize what can go right. Your Gen X clients at first will doubt your optimism. One way to help keep them on track is to talk with them in a manner that is straightforward and simple. Pause a lot, make room for their questions and doubts. Listen to their concerns and be careful not to seem dismissive of them. Many advisors miss this with Gen X and take their doubts as a challenge to their expertise. If you can hold some space for their skepticism and really accept that it is part of their psyche and not personal, you will secure your relationship with your Gen X clients.
Similarly, when you present a plan and speak about the future, do it in a straightforward way. You will be viewed as really understanding this client if you produce a plan for the future along with transparency about what might go wrong, where, and when. When you’re trying to present yourself as a guide to helping your clients achieve their goals, it may seem counterintuitive to be this forthcoming about risk. While it may seem that presenting a sunny view of the future would appeal to current and future clients, trust is built, especially with this generation, when we are real and humble, especially for Gen X. It will do a lot to build their trust. Being forthcoming and putting the worst-case scenarios out there can give you the perfect opportunity to subtly showcase your expertise as you also present strategies to manage these risks.
This do-it-yourself generation has come far on their own to figure life out, but they find themselves stuck when it comes to their finances. Helping them see what is possible while speaking to their desire for security and how it affects their investing decisions is a powerful way to connect with your Gen X clients.
Begin with the End in Mind
Gen Xers came to our workplaces along with the introduction of 401(k) plans and the decline in pensions and defined benefit plans. A recent Transamerica study noted this moment and called Gen X “the 401(k) generation.”11 Recognizing that they were on their own once again, Gen X took advantage of the new workplace savings plans available to them and began saving for retirement earlier than previous generations. In addition to recognizing that their companies and government could not be counted on to provide critical retirement benefits, innovation, and features like automatic enrollment, employer matches, and the inescapable break room poster calculating the future value of trading a Starbucks coffee for an extra $25 per week in savings all contributed to Gen X’s willingness to save. Generation X’s early start and the good habits that were encouraged, automatic payroll deductions notwithstanding, this generation is woefully underprepared for a solid retirement. Gen X simply hasn’t saved enough and the recent market downturns have only exacerbated the situation.
There are a number of alarming trends (Table 6.1) that advisors need to bear in mind when working with these clients and also some amazing opportunities.
| Fact | Something to think about! |
| According to Employee Benefit News, 64 percent of Generation Xers have some money saved for retirement, but only 8 percent have saved enough. (http://www.benefitnews.com/news/generation-x-falling-short-on-retirement-preparedness) | Most Gen Xers have committed to their chosen life path by now. Whether that is pursuing a traditional career, starting a business, starting a family, or not. This is also a time when they may face some life challenges that can create significant financial setbacks: taking time off to raise children, divorce, and beginning to care for elderly parents. Most Gen Xers know they need to be saving more and many do not know where to begin. Help your Gen X clients understand their “number” and create a feasible and desirable path to achieving it. Be sure to help them consider both sides of their balance sheet—assets and debts—and face the truth about where they stand, no matter how difficult. Facing the facts about our financial situations can conjure up the dread similar to stepping on the scale or opening a monthly credit card statement. We may not like the number, but without knowing where we stand, we have little hope of making the necessary changes or plans that move us along to our desired state. Gen X is counting on you to help them get a true picture of reality and a plan for success. Caught between the squeeze of mounting responsibilities and running out of time to save, they need your help and are urgently looking for advisors with solutions and the patience to guide them. |
| Northwestern mutual finds that 34 percent of Generation X does not know how much they will need to retire. (https://www.northwesternmutual.com/about-us/studies/planning-and-progress-2015-study) | If we had health issues we wouldn’t guess at the diagnosis, yet when it comes to our finances, there’s a tendency to rely on bias and guesswork. Our brains are very good at synthesizing information and piecing together stories. We can process a lot of variables and we often guess right—this is the foundation of overconfidence. Generation X does not have the time or extra savings to accommodate a margin of error. They cannot fund their dreams on estimates. Once your clients have transparency, clarity, and a view of how they are doing, it’s time to help them analyze their cash flow and start working on building a better budget. Many Gen Xers understand their basic savings and investing options. Gen X knows it needs to save more. What’s missing is access to education and solutions that can help make saving easier. You will stand out if you can provide this kind of unique education to help your clients understand their options as well as any possibilities to fast-track their savings and investment plans. |
| For example, can you encourage your clients to take full advantage of their employer-sponsored 401(k) or 403(b) program, including catch-up provisions? Can you help them develop good habits like maximizing deferrals, avoiding loans, and early withdrawals? Remember, Gen X has their own bias to not trust or value a financial advisor. If you can help them remove the guesswork and be straightforward, you will build solid relationships with these slow-to-trust, difficult-to-please clients. You’ll be more successful relating to this client if you chunk your advice into small, manageable goals. Help your clients zoom in and zoom out on achieving their short-term goals, work through immediate obstacles, and keep an eye on the big picture. If you can do this, you will endear this valuable Gen X client to you and your business in deep ways. | |
| Northwestern Mutual’s “Planning and Progress Study” found that 66 percent of Gen Xers think they need to improve their financial planning skills; 23 percent are “not al all confident” that they can reach their financial goals. (https://www.northwesternmutual.com/about-us/studies/planning-and-progress-2015-study) | This generation has so much going on managing their family life and professional lives, even when they agree with your recommendations, they may have a hard time following through. The financial advisors we admire use the natural human tendency to procrastinate, or get distracted, as an opportunity for regular and consistent communications. Ross Levin’s firm, for example, sends a list of agreements after each meeting. His relationship team sets to work scheduling check-ins, helping their clients tick off each goal or to-do as it’s achieved. For Ross’s firm, it’s an incredible tool to stay close to their client. For a Gen X client, it’s a tremendous way to add value and help them feel a greater sense of accomplishment with their lives. |
| The Transamerica Center for Retirement Studies finds that 65 percent would like more education and advice from their employers on how to reach their retirement goals. | With so many Gen Xers craving education and help planning for their retirement, one way to scale your service model to meet this need is to take advantage of Gen X’s propensity and preferences for “do-it-yourself” business models. You can offer access to learning through electronic channels, pointing these clients to blog posts, articles, and links to educational websites. There are many nonprofit financial literacy sites that make their content available for sharing that are good sources for content. See, for example, the Institute for Financial Literacy: https://financiallit.org. Firms and advisors who are more sophisticated and embrace technology in their businesses may want to consider adding a marketing automation system to their customer relationship management (CRM) platforms. These systems can help advisors increase the quality and effectiveness of their customer experience overall. Think of it as an extension of your service model, strengthening high-tech interactions with digital touch points that can feel just as personal. |
We see the top firms creating personalized campaigns. These campaigns may be segmented client, topic, or other criteria. What many firms appreciate about marketing automation is the ability to schedule ahead marketing activities that are proactive, not reactive. You can think of this as a marketing tool that can provide “air cover” to support your existing business development needs. While you may schedule in-person or high-tech client meetings on average once per quarter, marketing automation allows you to schedule e-mails, web posts, and other communications ahead of time, allowing you to stay front and center with your prospects or clients and keeping a dialogue going. You can drip the educational materials and information your clients crave before they have to ask for it—or even know that they need it. You can create campaigns around life events and automatically schedule educational material deliveries. You can craft “personas” and campaigns that align with the needs and desires of that niche. One example could be Gen Xers turning 50 and needing to accelerate their savings. For this group, you can schedule a campaign in advance of their fiftieth birthday to help them understand their options and eligibility for catch-up contributions in their 401(k), 403(b), and 457 plans, and IRAs, as appropriate. Today’s digital world is full of short attention spans and competing messages. One of the most powerful ways to ensure your communications are opened, appreciated, and your clients and prospects are taking the actions you want them to take is to send communications that build trust. Your role as advisor implies it is a trusted one. But for your client to build trust that you understand them and that your e-mails are worth their time to read and interact with requires some work on your part. The best programs aim for consistency in timing, and delivering high quality content that is insightful and engaging. This is what makes educational content so powerful. In terms of content, it is about their other interests. When it’s well timed and thoughtfully executed, the ways marketing automation and campaigns can help deliver, it builds a pattern of trust, showing your clients that you understand them, are anticipating their needs, and are giving them the security and feel-good predictability that you are thinking of them and their well-being. Offer solutions proactively; don’t wait for them to raise an issue or concern. As efficient as e-communications are, they are no substitute for taking the time to connect with these clients in person and maintain your high-tech interactions. |
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| The personas you develop for your e-mail campaigns can inform your in-person interactions, too. A top firm in New York, with whom we’ve worked extensively, focuses their practice on the needs of high-net-worth divorced female clients. Many of these women have not been as closely involved with their finances as their ex-husbands or partners. In order to build their confidence managing money and budgeting, these newly divorced clients are required to visit the office each month to receive their statement. At this time, the relationship manager tasked with overseeing the relationship walks the client through the statement review. Along the way, they are pointing out the asset classes, account balances, areas to pay closer attention to, and the risks to manage. This once-a-month meeting solidifies the relationship and provides these clients with a much-needed and much-appreciated boost to their financial literacy and confidence. A combination of approaches is a solid path to consider. Whatever you provide, be sure it’s simple, easy to understand, and you’re checking in regularly with your clients to see if it’s meeting their needs, the right level of support, and contains appropriate and actionable ideas for follow-up. | |
Many advisory firms struggle to understand, never mind calculate, a return on investment on their marketing and business development activities. When you invest in marketing automation and tie the campaigns to your CRM, you will receive, over time, powerful information on what messages resonate with your clients. You will be able to see what content assets, campaigns, or conversations activated a new prospect relationship or further cultivated an existing client relationship. For those firms with a chief marketing officer or dedicated management focused on business development, investing in data-driven tools like marketing automation can help your firm move from measuring soft metrics like brand awareness and vanity metrics like web clicks, hits, and search results to better measure significant impacts to your revenue, profits, and pipeline development. This will yield better results for your business, as you’ll soon be able to accelerate programs that are working and discontinue those that no longer work; but you’ll also help your marketing and business development teams establish professional credibility and a seat at the leadership table. Too many advisory firm owners are still too dependent on their individual rainmaking abilities or find that they are afraid of investing in efforts that feel reminiscent of a time in their career when what they sold was more important than the relationships they developed. We need to help reshape those perceptions. We need to give owners of advisory businesses the same tools to anticipate client needs, spark client conversations, and proactively address the unspoken needs and questions weighing on our clients’ minds that big firms with big marketing teams and budgets have. |
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Investing in marketing as a science is a powerful tool to level the playing field. Some market-ready solutions advisory firms may want to consider include:
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| The Insured Retirement Institute finds that 77 percent of Gen X workers do not use a financial planner when saving for retirement. Those that do have saved nearly twice as much as those who go it alone. (https://www.myirionline.org/docs/default-source/research/the-retirement-readiness-of-generation-x-january-2014.pdf?sfvrsn=2) | We’ve talked about the rich potential of Generation X as clients, so this statistic should really underscore the opportunity. Today’s financial advisor’s clients in some ways can be considered a diminishing asset. Mature and Baby Boomer clients will soon be in the drawdown phase of their assets. No longer creating wealth and aging, the attributes of these clients from a long-term business perspective need to be examined. It’s clear that advisors need to look to the next generation and it’s clear that there’s an oversupply of clients in need of professional financial guidance. So why are these clients without advisors? The issue seems to be twofold, with bias, hesitation, and uncertainty for how to engage existing with both advisors and investors. Advisors have a long history and strong bonds with many of their older clients. They have often worked together so long that these relationships are often pleasurable—friendships, really—and advisors may naturally (often unknowingly) turn more of their attention to these more-established relationships even if they do not need the nurturing and development that newer and fledging relationships require or would benefit from. Advisors also have their share of bias. They may have wrongly concluded that Generation X and its younger generation brethren are too far from retirement or do not have enough assets to require or value their services. Many advisors are dispelling this and finding that although their clients have a long runway until retirement, they are still hungry for advice, information, and a relationship with someone who can provide them with steady counsel. |
| On the other hand, investors themselves contribute to the low match rate between advisor and investor. There is considerable reluctance from younger investors to seek out and invest in a relationship with a financial advisor. For starters, many Gen Xers and their younger siblings, the Millennials, tend to be conservative investors. Many feel permanently scarred by the Great Recession. These investors project their own bias and may wrongly associate financial advisors with managing more risky investment options like stocks rather than helping find more stable and consistent assets like cash management strategies and real estate.* Many of these potential clients do not seek an advisor because of a lack of confidence. Having few experiences of being proactively sought out by advisors and hearing a regular refrain of being “too small,” many clients are fearful of not feeling valued or of being rejected. Instead, these potential clients find themselves consulting friends, family, investing peer groups, or even the Internet and social media for investment advice. Others would simply prefer to do it themselves. On account of trust issues, a feeling their advisors don’t understand them, or simply falling back on their infamous “do-it-yourself” attitude, many affluent Gen Xers who do not have a financial advisor say that they prefer and are deeply engaged in managing their own wealth. These do-it-yourself younger investors value someone to validate their decisions. There’s an attraction for these investors to an advisor who is willing to collaborate, share the investing process with, allow these clients to be actively involved, and hear them out about certain investment preferences, for example, social finance and ways they can ensure their investing decisions contribute positively to their communities. | |
The appeal of digital advice, more transparency, and lower costs may be other drivers of the reluctance to use a traditional financial advisor. While the business model is new, Gen Xers are considerably comfortable with technology, and a good look “under the hood” does not highlight too many differences in investing approaches. For example, most “robo” or digital advisors still rely on the same investing principles—modern portfolio theory, examining and adapting for risk tolerance, and time horizons and so on— and provide this generation with a comfort that the services they will receive at a fraction of the cost is worth a hard look. These digital business models are also appealing to these next-gen investors because they remove some of previously mentioned obstacles. There is little fear of rejection for being too small or insignificant when you’re perusing a website or filling out an online application. The business model is also at the intersection of Gen X’s desire for do-it-yourself (they can view balances, research investments, and interact socially with other like-minded investors) while still providing them with high-tech interactions and thoughtful guidance when needed or their investing situations become too complex. These digital solutions are also a tempting substitute for a real advisor because of the promise of their mobile and frictionless client experience. The financial services industry has largely escaped disruption. Some of the most exciting innovations in recent years come from these digital advice providers. These business models have good timing and are riding the wave of high customer demand for smooth client experiences, transparency, low cost, simplification, and ease of doing business. We believe real advisors and real relationships will always have an advantage. What makes these firms easy to dismiss by some is that they think there is no human interaction. This needs to be reconsidered and challenged. On the other side of the click, the e-mail, or interaction are often talented financial professionals and advisors as committed to solving their client’s problems as those who operate in traditional business models. The good news is, the digital space is not limited to a few players. There are many white-label options available for advisory firms to consider so they can continue to offer their traditional services while experimenting with this model and engaging the next-generation client effectively and in a way that’s compelling to them. *Suelain Moy, “Why Investors Prefer Real Estate Stocks, Bonds and Gold,” July 22, 2015. Available at: www.thefiscaltimes .com/2015/07/22/Why-Investors-Prefer-Real-Estate-Stocks-Bond-and-Gold. |
Source: Employee Benefit News (2016), Northwestern Mutual (2015), Transamerica Center for Retirement Studies (2014), and the Insured Retirement Institute (2014).