With the economy still showing signs of instability, young affluent investors may need more time to regain their confidence in financial markets before sticking their feet back into the investment pool, according to a recent survey.

In fact, the survey indicates many of today's young investors may have actually reduced expectations about how their investment portfolios will grow leading to their retirement.

According to a MFS Investment Management's annual Investing Sentiment Survey, mass affluent investors' pessimistic attitude about the investment market isfueled by continued concerns over the 2008 financial market meltdown, rising health care costs, the growing federal deficit, possible reductions in Social Security benefits, and continued unemployment.

"We believe a lot of those trends are still in place, and probably will be in place a lot longer than folks that provide (financial) advice are comfortable with," said Bill Finnegan, director of global retail marketing for MFS Investment Management, a Boston-based mutual fund company.

In its survey, MFS defines mass affluent investors as those who own between $100,000 and $1 million in household investable assets.

Generation X and Generation Y respondents displayed the stronger market fears, a possible consequence of not having lived through the prosperous market of the mid-1990's before the dot.com bubble burst in 2000, he says.

"A lot of the folks in the survey, especially the Gen X and Gen Ys in the group, don't have the 1990's to look at fondly," Finnegan said. "'The bubble bursts, then you have 9/11, and then ten years later, a tsunami, earthquakes and wars, and, a very flat stock market."

Gen X/Y investors on average had a lower percentage of their portfolios in equities (34 percent) than Baby Boomers (36 percent) and investors over 65 years old (38 percent).

Gen X/Y investors also reported a higher percentage of their portfolio is in cash (30 percent) than older investors.

Gen X/Y investors are also more concerned about whether they will be financially secure for retirement. Despite a median 23 years until retirement, 61 percent of Gen X/Y respondents said they are they more concerned than ever about being able to retire when they thought they would.

"The length of the employment recession weighs heavily on people," Finnegan said. "When you go to the gas pump, that $4 is a magic number. Once you go over $4 a gallon for gas, all spending starts to slow and people start to get nervous."

Princeton-based certified financial planner Eleanore Szymanski, a principal at EKS Associates, LLC, says there's an increasing number of younger investors who realize some of the financial instruments their parents are counting on may not be around when it's their time to retire.

"They know that the Social Security system or health care is not going to be there for them," Symanski said. "I see young people who are much serious about taking care of themselves--being financially responsible for their lives early on."

According to the survey, roughly 44 percent of young mass affluent investors have reduced their discretionary spending over the last 12 months with only 14 percent reporting to have increased such purchases.

The survey also reported that roughly 49 percent of the respondents agreed with the statement that they had lowered their expectations about life after retirement compared to ten years ago.

Given young investors' cautious approach, Finnegan suggests that financial advisors may need to re-evaluate their approach.

"With Gen X/Y maturing and boomers approaching critical decision points for retirement, we believe advisor should reassess how they communicate with clients," including assessing how the 2008 financial crisis impacted their risk tolerance, Finnegan said.

Finnegan says advisors' role will nneed to persuade clients that investment opportunities still exist.

"When you look at their overall investment picture, it's probably not as dire as they think it is," he said. "So that's where the opportunity lies for financial advisors, especially when this group is saying, 'hey, I could use some advice.'''

-Jim McConville