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Communication, Trust Top Priorities When Targeting Gen X Investors

When it comes to building and maintaining a successful advisor/investor relationship, Gen X investors are most likely among the generations to say that trust comes first, according to a new report.

And to create a successful customer experience, quality communication is the No. 1 factor for Gen X investors, followed by low-cost products and services, and a one-on-one relationship between advisor and client, according to “Moving the Needle: Targeting Generation X,” from Jefferson National.

The study surveyed approximately 1,600 RIAs, fee-based advisors and individual investors across the country in an effort to better understand Gen Xers' priorities and concerns. It explains that Gen Xers are climbing the ranks of net worth — the number of affluent Gen X investors now exceeds the number of affluent Baby Boomers — and are poised to build on and inherit more wealth, rising from $5 trillion of financial assets in 2015 to $22 trillion by 2030.

But despite their growing wealth, Gen X investors apparently are the least likely to seek professional advice, as slightly over half (52%) say they do not have an advisor. “Studies show they are cautious, skeptical and even mistrustful of advisors and the financial services industry overall,” the report notes.

Nevertheless, this seems to suggest there is a ripe opportunity for RIAs and fee-based advisors to tap into this client segment. “Being in their prime earning years and next in line for inheritance, Gen X is a vital segment for advisors to target in order to enhance profitability and set their firms up for future success,” notes Craig Hawley, head of Jefferson National, which operates as Nationwide’s advisory solutions business.

Attracting and Retaining Gen X Investors

To attract Gen X investors, the report suggests that “it is vital to understand that saving for retirement is their primary driver” and the No. 1 reason for having an advisor. Concern about saving enough for retirement was cited by 30% of Gen Xers, compared to only 15% of Millennials and 12% of Boomers. By comparison, the other generations say that “feeling confident in their financial future” is the top reason for having a financial advisor (27% for Millennials, 36% for Boomers and 36% for so-called Matures).

The report also suggests that advisors should take note that Gen X investors “are far more concerned about financing children’s education, and far less concerned with protecting assets and taxes” than Baby Boomers and Matures.

When choosing an advisor, the findings show that Gen X investors say experience matters most (41% in 2017 and 43% in 2016). “Personalized advice for a holistic financial picture” (26% in 2017 and 37% in 2016) and a “fee-based fiduciary standard instead of a commission-based sales model” (20% in 2017 and 22% in 2016) rounded out the top three year-over-year factors.

As to communication preferences, Gen X investors say that face-to-face meetings outrank all other forms of communication. While technology and online communications can create efficiencies, the report notes that Gen X investors still say that “technology is no replacement for guided advice.”

“Your new technology should scale your current infrastructure, allowing you to bring on more client relationships to your existing structure, without significantly increasing your head count,” explains Jason Pinkham, Director of Relationship Management & Transition Services, Dynasty Financial Partners, who participated as a subject matter expert for the report. “That’s difficult to do, but it comes down to developing an efficient, scalable practice.”

The online study was conducted by Harris Poll from March 13-April 7, 2017, among 779 employed financial advisors and 817 investors, who are primary or shared financial decision makers with investable assets greater than $100,000.