Wealth Managers Must Get To Grips With Generations X And Y - Pershing

Tom Burroughes

15 April 2013

While the ageing Baby Boomer generation attracts considerable wealth management attention, understanding the different outlook of younger population cohorts must be achieved for firms to stay in business, according to Pershing, the financial services firm that is part of New York-listed BNY Mellon.

The so-called generations “X” and “Y” must be attracted and managers must understand very different attitudes towards wealth, investment and lifestyle that these population groups have, the bank said following a recent client advisor council in the UK. The council is part of the firm’s practice management program.

For definition purposes, Baby Boomers are aged 47 and above; Generation X is aged between 32 and 46 and Generation Y is aged 32, it said.

Among the differences noted is a much greater willingness to embrace technology among younger people and a less trusting attitude towards traditional banking models, Pershing said.

A number of banks and professional services firms have explored the implications for the wealth industry from how different age groups think about money and investing. In a report issued early in April, Bank of America described wealthy investors between the ages of 18 and 35 as savvy, independent and sceptical. But that firm also identified a “classic perception versus reality scenario” as, contrary to some stereotypes, the differences between these so-called millennial investors and their parents’ generation are actually very subtle. In another study, Accenture found that investors between the ages of 21 and 30, known as “millennial investors” are more conservative and less trusting of financial advisors than their older counterparts, baby-boomers and generation X. The younger generation are also more inclined to consult other sources before accepting financial advice.

Time horizons

“Wealth businesses that are thinking about growth over a longer time horizon than the lifespan of their current client base need to carefully consider how they will attract and serve generations X and Y investors,” Paul Bayliss, director and head of wealth and advisor solutions at Pershing, said in the report.

“The key to cultivating relationships is to invest in talent, technology and personalized approaches that can overcome the lack of trust prevalent among these groups and position the client adviser as a useful resource and straight-talking counsellor. Such approaches will strengthen a firm’s ability to attract a range of under-served investor groups and diversify their client base,” he said.