The Times They Are a-Changin’


By Jeremy Office Special to The Pineapple 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 across the 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 the initial consultation process the first step is getting to know your client and understanding what makes them tick. One aspect we need to understand is what might have influenced their perception of money and investing. Therefore, I thought it would be interesting to see what some characteristics of generations are and how this can affect their views on wealth management. First, let’s focus on Baby Boomers since they are the generation that is looking at retirement today. The Baby Boomers are born from 1946 to 1965. The post-war 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. As Baby Boomers began to reach retirement age, fast forward to 2008 when we experienced the largest recession since the Great Depression and you can understand their concerns about financial security in retirement. The following generation is referred to as Generation X. This includes people born from 1965 to 1976. This generation is characterized by growing up during corporate downsizing, massive layoffs, governmental scandal, and 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 are more prepared by having taken advantage of company 401(k) accounts and began to save at an earlier age. Some current concerns for Generation X are college savings plans for their children and cash management. Lastly, the generation born between 1977 and 1998 are 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 growing up immersed in technology and connectivity they value relationships and the ability to have instant gratification. They also happen to be the most educated generation entering the workforce. With that education also comes the highest level of student debt of any other previous generation. Facing few job prospects, towering student loans, and an uncertain future entering the workforce during the recession, they are more hesitant to stay in one place. They are mobile and rent rather than buy. Climbing the corporate ladder isn’t something they place emphasis on. In a generation where Mark Zuckerberg dropped out of college to start Facebook and turn it into a multibillion dollar company and the rise of app development making people rich in a fraction of the time, they have embraced entrepreneurialism and look to make an impact in the world. After seeing their parents have to delay retirement and scale back their spending because of the 2008 recession you can understand that they would be 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. As the benefactors of inheriting an estimated $15 trillion of baby boomer wealth, they need to be advised on how to handle and deal with such transfers. As I have only scratched the surface on generational differences, I think it is important to be cognizant of the different generations. Being able to understand our members not only builds a stronger relationship, but also provides us with the insight needed to better service them and add value. As with any business, you need to adapt to the times and environment and know your customer. As wealth is transferred from one generation to another, knowing the mindset of different generations can be what sets us apart and keeps us from making the same mistakes and assumptions. Sometimes we should learn from the past to prepare for the future. Jeremy Office, Ph.D, CFP, CIMA, MBA is Principal at Maclendon Wealth Management in Delray Beach and specializes in portfolio construction, strategic asset and liability management, and long term planning relating to financial matters as well as real estate, income tax, insurance and estate planning. He is also Managing Partner of SJO Worldwide a venture capital company. 855.MAC.WEALTH