Advisors also have to be more tech-savvy when dealing with Gen X. "My clients demanded that we do more electronic-based communication," says Karen McIntyre, vice president and managing director of financial planning at Vantage Point Advisors in Blue Bell, Pa. She notes that life in the instant-communications world can be intrusive, and she sets boundaries for BlackBerry- and e-mail-addicted clients regarding when they can and can't expect a reply. "I tell them that when I'm not working, the phones are off," McIntyre says. "You can call and leave a message, and I'll respond during business hours."
That said, McIntyre says she loves serving Gen-X clients. "The younger generation understands the need for a comprehensive relationship and they use it to the fullest," she says. "These folks are getting more value than people who never really understood what comprehensive planning was 15 years ago. If you manage their expectations and deliver on it, they're yours forever."
Among McIntyre's Gen-X clients is a couple in the medical profession: He's a cardiologist; she's a pediatrician. They're getting close to paying off their education loans and are in the middle of buying into their respective practices. In a few years, they'll start saving for retirement. "But for now, they have bupkis," she says.
Still, some Gen Xers come with a do-it-yourself mindset that makes them less willing to delegate authority to their advisors. "It's an arm-wrestling thing," says Bedda D'Angelo, president of Fiduciary Solutions in Durham, N.C. "I'm constantly fighting them to move in a certain direction."
D'Angelo says she has one Gen-X client who wanted to double check that she had set up the automatic transfer from his checking account to his Fidelity brokerage account, which is D'Angelo's custodian. He tested it by putting $10 into his IRA, but because he had already fully contributed to his 401(k) plan for the year, the $10 became an excess contribution that created all sorts of hassles. "That's a typical Gen-X thing," she says. "They'll do something on their own without looking at the consequences, and I spend months cleaning it up."
That said, D'Angelo says she enjoys working with Gen Xers who appreciate what she can contribute to the process, even if they're not the proverbial golden goose egg. "If I wasn't in a position to pick and choose clients, they wouldn't be a profit center, because they're more work with this daily education thing versus the $2 million boomer with an IRA rollover-where all you have to do is an annual review and proactive portfolio maintenance."
Bobbie Munroe, the Atlanta planner, says Gen Xers can become good clients after they get comfortable with an advisor. "They'll shop around in the beginning and can be distrustful," she says. "But once they trust you, they're pretty good about delegating."
More than anything, McIntyre is advising them on matters such as handling bonuses. She has also helped them decide how an investment opportunity in an office building will help them achieve their long-term goals. "At this point, we're doing everything but investing," she says.
McIntyre's firm uses a few client service models-a traditional fee-based model of 1% of assets; an assessment-only model consisting of a diagnostic plan; and a hybrid model that sets an annual project fee of $5,000 until a client reaches the firm's $500,000 minimum to qualify for the traditional fee-based model. That works well for Gen Xers who'll likely remain as long-term clients. "It allows people who are going to get there to get there with guidance," she says. "For people we work with, $5,000 is very manageable. They pay their house cleaner more than that."
John Deyeso, the 31-year-old founder of Financial Filosophy in New York City, says advisors serving Gen Xers will have to transition them from one fee model to the other as the clients' financial landscapes evolve. "Some Gen Xers will transition in two to five years, some in ten years or maybe even longer," he says.
Various studies of Gen Xers have portrayed the group as a free-spending and debt-laden lot who are wary of financial advisors, in part because they distrust the product-oriented, hard-sell approach. One study of 5,000 Gen Xers done earlier this year by Charles Schwab found that almost 45% said they have too much debt and 47% said they live on a very strict budget with nothing left over to sock away. When it came to saving, 43% said their focus was on saving for a big trip. And 46% said that turning to financial advisors for help might cost them more money than they make.
On the flip side, many Gen Xers have made small fortunes in the high-tech industry, while others are successful doctors, attorneys and entrepreneurs. They are the potential next-generation target market for advisors, and many are more ahead of the game financially than their parents or grandparents were at this point.