Boomers, Generation X or Millennials — guess which seems to have trust issues with advisers and investing?
According to a new study by Capital Group, Gen X has far more trust issues and anxiety about investing than their other cohorts, having lived through two major market crashes and slower wage growth during their formative adult years.
In addition to this anxiety, Gen Xers seem more skeptical of those providing financial advice and less likely to seek out their support compared with Millennials and Boomers. They are somewhat more likely to have a financial adviser than are Millennials, according to the report, but a lot less so than Boomers. Gen Xers are also less likely to turn to their adviser during turbulent financial markets or to seek recommendations on specific investments.
And despite trust issues — or maybe because of them — Gen Xers respond positively when asked about fund managers who are aligned with investors through high levels of ownership in the funds they manage. Two–thirds of Gen Xers agree that fund managers who invest a lot of their own money in the fund are more likely to do well for their investors. Moreover, 57% of Gen Xers believe that actively managed mutual funds with high manager ownership, plus low fees, are the most likely to be on their side and deliver better returns than other active and index funds over time.
Nearly two–thirds of Gen Xers say not having enough money to retire with peace of mind is something that keeps them up at night, compared with half of Millennials and 45% of Boomers. One in three Gen Xers are worried they are not earning enough money to be able to invest for the future, and a quarter of those in the 37-to-51 age bracket say the same about having to pay off loans and pay for their children’s education.
Generational Perspectives
Boomers have the lowest expectations about future market returns, but they have the most positive and optimistic outlook on retirement. For Millennials and Gen Xers, it’s the opposite: They are more bullish about the market, but less so about their own retirement.
The study finds that each generation has taken the need to start saving early more seriously. That said, Millennials have really gotten the message they need to start saving early for retirement. Nearly 6 in 10 (59%) Millennials began saving for retirement before the age of 25, compared to 42% of Gen Xers and 28% of Boomers. Additionally, a quarter of Millennials believe that children born today should start saving for retirement even before their 18th birthday, and 60% of Millennials believe children born today will need to start before they turn 21, compared to 50% of Gen Xers and 40% of Boomers.
Baby Boomers are the most steadfast in recognizing the value of — and sticking to — a long–term investing approach and staying the course in good times and bad.
Market Outlook
As for market outlook, Gen Xers and Millennials expect that market “good times” will continue to roll, but they are a lot less positive and optimistic about life in retirement. On the other hand, Boomers – who have seen more in the way of market cycles – expect future market returns to be lower, but they have the most peace of mind and positive feelings about retirement. The differences in highs and lows are the most telling: Over the next 10 years, only 16% of Boomers expect the market to do as well as the last five (when the S&P 500 total return averaged over 12% annually), while nearly twice as many Millennials (31%) and Gen Xers (28%) picked the most bullish scenario.
Future ‘Tense’
When asked to select which financial concerns keep them up at night, including having enough money to retire with peace of mind and being able to ensure care for themselves or a family member, 37% of Boomers said, “None of these.” Asked how they will feel on their 100th day of retirement, 61% of Boomers expect to feel satisfied, 40% would feel fulfilled and 30% thought they would be busy, compared with much less positive responses for Millennials and Gen Xers.
When asked “what keeps you up at night,” one-third of Millennials said their top financial concerns include not being able to save for the future because they are not earning enough money or have to pay off their loans. One in three also worry about having enough money to pay for their children’s education.
Gender Gaps
Men are a lot more optimistic than women about the investment outlook over the next 10 years, but women have a more positive outlook than men when it comes to the next two or three decades. The bullish trend is most visible among Millennials, with twice as many men (40%) expecting the market to do well as women (22%). Only 17% of Millennial men expect lower returns over the next 10 years, compared to 30% of Millennial women. Boomer women are the most pessimistic, with 39% expecting lower returns compared to 27% for men.
