They may be known as the Forgotten Generation, but Generation Xers can no longer be overlooked, as they stand to inherit the largest share of an estimated $30 trillion in generational wealth transfers by 2045, according to Cerulli Associates.
Bookended by baby boomers and millennials, Gen X investors are between the ages of 40 and 55, representing just 27% of all U.S. households, but they have a total addressable market – total financial and non-financial assets held among households – of more than $14.2 trillion, with an average of $405,000 per household, according to Cerulli.
Gen Xers, according to Cerulli’s report, have exhibited similar buying behaviors and preferences as millennials, the largest American workforce in history. As a result, many strategies designed for millennials and Gen Z may prove successful for the larger addressable market represented by investors in their 40s. But as Gen Xers continue to accrue assets closer to today’s boomers, Cerulli said firms must empower advisors to pay closer attention to the needs of this cohort.
Cerulli noted that even though Gen Xers were among the hardest hit during the Great Recession, theirr economic sentiment has improved. The report said they had among the highest rates of optimistic economic outlooks (77%) as of mid-year 2021. Further, it noted that fewer than one-quarter Gen Xers self-identified as having a conservative investment risk tolerance, and nearly two-thirds acknowledged that they need more financial and investment advice than they have received in the past.
Such attributes, Cerulli said, “represent enormous opportunities for an industry that is increasingly focused on financial planning instead of pure money management. The opportunity is particularly strong for providers that can adequately incorporate strong debt management and tax optimization strategies into their financial planning services.”
Gen X investors, like many millennials, identify as self-directed investors and plan to have greater oversight of their assets and portfolios, the report noted. Advisors must focus on developing online services that complement personal, empathetic interactions, Cerulli said, noting that, while many are considered as partially self-directed investors, nearly two-thirds of investors in their 40s are interested in learning about new investment ideas and opportunities, and 72% are willing to pay for the advice. “Advisors can also use these interactions to discuss any changes in finances or goals and to reinforce the value of human-intermediated,” Cerulli added.
But the report also noted that 83% of investors in their 40s are satisfied with their advisors and 93% would recommend their advisors to others. “Like most investors, they place significant value on advisors taking the time to understand their needs and goals, while providing transparent and simple analysis and plans,” Cerulli said.