Generation X usually isn't perceived as being ready for prime time when it comes to financial planning, but consider a couple of stats regarding this demographic. Take a look at a recent study by The Phoenix Companies that studied high-net-worth individuals with at least $1 million in investable assets. Among this universe of paper millionaires in America, the age group with the highest percentage of people with more than $2 million was Generation X, at 47%. The total sample survey-which also comprised baby boomers and their parents' generation-was 39%. And a four-year-old survey conducted by MainStay, a division of New York Life Investment Management, found that Gen Xers had an average household income of $144,000 versus $131,000 for boomers and $87,000 for the boomers' predecessors.

The latter data is somewhat dated, but the overall trend isn't, and the point is that Gen Xers-a group roughly defined as 32 to 43 years old-have basically outgrown their slacker stereotype and roared into adulthood with greater wealth potential than their parents' generation. Granted, many of them are at a stage in life where they're focused on such matters as accumulating assets, growing their businesses and saving for their childrens' college, but some of them already have an eye toward their retirement savings because they're acutely aware they probably won't have Social Security and pensions as safety nets. The result: Many are actively engaged in planning for their retirement at a younger age than the boomer generation, and they want professional help to guide them.

"I tell financial advisors that if they're going to be in this business beyond the next five to ten years, they have to pay attention to this group," says Walt Zultowski, senior vice president of research and concept development at The Phoenix Companies, a life insurance and annuities company in Hartford, Conn. "They are significantly different from other high-net-worth people we've dealt with before."

Different, they are, and advisors who serve the Gen-X marketplace should expect to play ball differently with this generation than it did face to face with previous generations. "They want to work with a lot of advisors, they want information, and they want to be involved," says Zultowski. "In a sense, they want to be the general contractor" that directs all of the input regarding their retirement savings.

That's a different approach than the "quarterback" model that some comprehensive planners use to coordinate the various financial aspects of their clients' lives. But despite Gen X's desire to maintain a sense of control over their portfolios, Zultowski notes they're also the group least likely to take the time to properly manage their finances.

For now, the advisory business is mainly focused on boomers and the generation before them. This is particularly true for older planners who have grown up in the business along with their older clients. "Advisors have a peripheral knowledge of Generation X," says Steve Gresham, senior vice president of asset management at The Phoenix Companies. He and Zultowski are collaborating on a book called The Gen X Advisor. "Gen X is like a musical group or movie they've heard of but haven't seen because it's not a generation in their world."

Gresham says that Gen Xers have more information at their disposal, are more careful about who they listen to, and have a greater sense of self-direction when it comes to financial information. "They won't necessarily bow to what the advisor says," he notes. "Advisors can see that as a threat to their authority. And a lot of advisors have told me that they're not interested in training another generation as clients."
Indeed, there can be a lot of upfront education and planning work for advisors with their Gen-X clients. "Initially, younger clients may need extra attention," says Bobbie Munroe, owner of Fraser Financial, a planning firm in Atlanta. "They lack experience on almost everything."

But Munroe says there is potential value in entering younger people's lives during their formative financial years. "With guidance at an early age, the up-and-comer is likely to become an 'A' client," she says.

Kirk Kinder, the 37-year-old owner of Picket Fence Financial in Bel Air, Md., counts about a dozen fellow Gen Xers among his 40 clients. He says most of them come from dual-income households earning $100,000 to $150,000, and on average most of their assets are tied up in 401(k) plans or in their homes. "There's not a lot of comprehensive planning to do," he says. Kinder says those with a lot of taxable assets outside of their 401(k)'s often prefer just doing a financial plan or getting advice at an hourly rate. A few are on retainer at a full-year rate of $2,500 to $5,000.

Kinder says his Gen-X clients are detail-driven and want to understand why he recommends certain courses of action. "I have to be prepared to show them some serious analysis," he says. "Advisors who aren't providing good financial planning services are going to have to shift their approach as Gen Xers get older. Advisors are going to have to work more for their money."

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.

Research from The Phoenix Companies found that Gen Xers are a contradiction-they're the wealthiest group, but they're also the most pessimistic. "They see clouds on the horizon regarding their financial future," says Gresham. The reason for this pessimism, he says, is that baby boomers and the generation before them enjoyed three things that the Gen Xers say they might not: a home whose value is greater than what they owe on it; stable Social Security and postretirement medical coverage benefits; and a defined-benefit pension plan. "Take away all three, and it's not a pretty picture," Gresham says.

That provides an opportunity for advisors. Some people believe clients are more comfortable dealing with advisors in their own age group, and vice versa. But Gresham says that's not necessarily true, and that many Gen Xers want advice from older advisors who've been through the wars and can lend their perspective. "An advisor can know what's ahead for them better than they do," he says.