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Generation X: understanding a new generation of clients

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When it comes to finding prospective clients, our industry focus is primarily on Baby Boomers, and for good reason. After all, in the time it takes you to read this, roughly 70 Boomers will reach age 65. But if you are spending all of your time with clients who are already in or nearing retirement, you could be missing out on a market segment that is very much in need of financial guidance.

Generation X (Gen X) represents the next face of retirement. Gen Xers were born between the mid 1960s and the late 1970s. The oldest Gen Xers are now in their 50s. Although Gen X cohorts are smaller in numbers than the Boomer generation before them and the Millennials (Gen Y) after, they represent a significant business opportunity and should not be overlooked.

To help you effectively prospect and communicate with Gen X clients, it's important to understand who they are, where they've been and where they are headed.

Swimming against the current

Gen Xers are highly educated, but the jobs they expected after graduation often never materialized. They have faced high levels of debt from student loans, high housing costs and periods of unemployment. Downsizing, mergers and layoffs, along with Social Security uncertainty and the disappearance of traditional company pensions, have been facts of life for Generation X unlike their parents, who remained with one company throughout their careers. These combined factors have made a big impact on Gen X savings accounts.

The “Great Recession” struck many Gen Xers mid-career. While lasting only 18 months, the economic turmoil took a huge toll. From 2007 to 2010, Gen Xers lost nearly half (45%) of their wealth, reducing their already low levels of accumulated assets. In 2016, even with the economy on the mend, one in five Gen X workers was still not contributing to a 401(k) or similar plan. Only 26 percent of Gen Xers were contributing more than 10 percent of their salaries, less than the generations above and below them. Gen Xers were also more likely (30%) to have taken a loan or withdrawal, often with a penalty, in order to cover everyday expenses.

Clearly this generation has some catching up to do. They have to reevaluate the way they spend, save and generate income if they expect to maintain their standard of living in retirement.

Working with a financial planner

Even though the need for financial advice is great, a 2014 study by the Insured Retirement Institute (IRI) found that 77 percent of Gen Xers are not consulting a financial planner to help them plan for retirement. Two-thirds (67%) of those with money already saved for retirement are not working with a financial planner, even though it could be in their best interest to, as savings rates are higher for those who seek the advice of a financial professional. The top reason for those not doing so is that they feel that their savings need to be higher before consulting a planner (25%). Of those that do, the top reason is to ensure that they are making the right decisions and to get a second opinion (40%).

The study found that nearly twice as many Gen Xers who work with a financial planner have retirement savings of $200,000 or more. For those that do work with a financial planner, their median amount saved for retirement is $90,400, twice the amount of those who are working on their own.

The IRI study also points out that less than one-third (30%) of Gen Xers rate themselves as being highly knowledgeable about financial matters. This represents a significant opportunity for financial professionals to offer their services and show Gen Xers with less financial knowledge how they can be more financially prepared for retirement.

Amount of retirement savings by whether a financial planner is used or not, 2014

working with a financial advisor bar chart verses not working with a financial advisor


A client today creates an annuity opportunity for tomorrow

Like your current Boomer clients, Gen Xers are concerned about outliving their retirement savings. Even though they may be behind the eight ball when it comes to saving for retirement, it remains a top concern for most Gen Xers. The good news is that there is still time. They are in great need of financial education and are searching for advice.

You may think Gen Xers are less likely than your Boomer clients to have the liquid assets necessary to fund an annuity, so it is too soon to talk about one. However, by keeping up with their life events you can identify key opportunities to provide guidance. For example, Gen Xers have the tendency to change jobs frequently and they most likely have a 401(k) plan that they may need to rollover. Rollovers provide a perfect funding source for an annuity. Inheritances are yet another source. Both are perfect ways to start the annuity conversation.

This generation has experienced great financial loss, yet still has a relatively long time until retirement. Because of this, annuities may offer a solution when the opportunity arises. Annuities that can create an income stream that lasts a lifetime, but also provide growth potential and a needed measure of protection from downside market risk makes them attractive to this generation.

Knowing who Gen X is and what drives their retirement concerns will give you a leg up in the game. When you show them how working with a financial professional will increase their financial knowledge and help them reach their retirement goals, you'll gain their confidence and their business.