Your Thriving Practice

The ‘forgotten generation’: How to work with Gen X

Gen Xers present great opportunities for financial professionals

Generation Xers are used to being ignored. They were the original latch-key kids, left to fend for themselves after school while their parents were both at work. That is, if they lived with both parents, since they were also the first generation for whom it was normal to have divorced parents. And while the generations on either side of them—baby boomers and millennials—have soaked up more media attention and research, Gen Xers have toiled away, earning the nickname “the forgotten generation.”

But financial professionals can’t afford to ignore them. Born between 1965 and 1980, these 43-to 58-year-olds make up the smallest of the generations but still account for almost 20% of the U.S. population (62.5 million) and one-third of the nation’s current workforce. And that age spread means you’re facing a group that ranges from people at the top of their careers to those contemplating retirement.

“They have worked through more recessions than their parents or grandparents ever did,”

The opportunities for financial professionals are great. As one generational expert, Mary Donohue, CEO of the Digital Wellness Center, puts it, “They are your bread and butter.” But to serve them well, you need to understand them. In many respects, Gen Xers are not like either the boomers or the millennials. While boomers may be the product of the halcyon ‘50s and the tumultuous ‘60s and millennials may have been shaped by both years of extended prosperity and more recent political and societal divisions, Gen Xers are also a product of their times.

They have worked through more recessions than their parents or grandparents ever did ,” notes Donohue. They’ve lived through the Enron scandal, huge corporate layoffs, Watergate, Rodney King, and more, adds Karen McCullough, who studies change and generational opportunities and speaks frequently about “Generations in the Workplace.” All of this, she points out, makes them more skeptical and even cynical when it comes to trusting institutions. As a result, she says, “they live by the mantra of ‘I work to live,’” and, more than their predecessors, are “direct, abrupt, and can’t tolerate B.S.”

Who are they?

Recently, as the boomer generation has begun to shrink and Gen Z has overtaken millennials as media darlings, researchers seem to have rediscovered the impact of Gen X. Some of their findings paint a picture that can help financial professionals who are looking to understand this generation’s specific needs and concerns.

Consider:

More than half of Gen Xers are concerned that they won’t be able to maintain their current financial position in the future, and nearly half question if they’ll ever be able to retire.
While 55% of Gen X assets are investable, only 21% of those assets have been professionally managed.
On average, Gen Xers save only 11% of their annual income.
While only 24% of baby boomers have already taken a loan or early withdrawal from their retirement accounts, 33% of Gen Xers have.
And while almost two-thirds of boomers who haven’t been offered 401(k) plans at work have put money aside for retirement, that’s true of only half of Gen Xers in the same position.
As the first generation to experience the connection between a college education and financial success—at a time when college tuition was beginning to skyrocket—Gen Xers have been saddled with more student debt than their elders: 65% of Gen Xers borrowed for college compared to only 30% of boomers.
While 26% of millennials say they expect to retire by the time they’re 60, only 12% of Gen Xers say the same. And that’s complicated by the fact that 56% believe that Social Security will be bankrupt by the time they’re ready to collect their share.

What these statistics suggest is that Gen Xers, more than boomers and millennials, are nervous about their financial futures, are often struggling with debt, and, in many cases, don’t seem to be taking the steps necessary to compensate for the issues they’re facing.

Taking charge

But other statistics indicate that this pattern may be changing. For example, while a recent New York Life study showed that 71% of Gen Xers who have investments are not planning to make changes to their investment portfolios this year, 40% of those who are thinking of making changes plan to start working with a financial professional or robo-advisor — 42% of whom are making those changes is to start preparing for retirement. Moreover, for many of these Gen Xers, knowing what to do with their expected inheritances may soon become a major financial issue. While many Gen Xers are years away from collecting their inheritances—given both their age and greater longevity among their parents—it’s estimated the Gen Xers may eventually inherit almost $30 trillion compared to $4 trillion for boomers.

In addition, many Gen Xers are eager contribute to causes that are important to them. According to a recent article in the Wall Street Journal, Gen Xers are at the forefront of the ESG (environmental, social, governance) movement, with nearly two-thirds of high net worth Gen Xers saying they consider ESG factors when they’re investing.

The Gen X market, in terms of both numbers and need, is a population that financial professionals should be targeting. Despite the generation’s skepticism, its early experience with economic woes, and its skepticism toward institutions, the need for reliable and trustworthy financial guidance is clear. As one survey respondent told researchers at the public relations firm Weber Shandwick, “I feel like there is too much information and too many opinions about what you should do. It is also confusing about what types of investments I should put my money in because there are lots of different rules with each one.” Another respondent built on that theme, noting that, when working with a financial professional, they need to “know you will take good care [of my money] and look toward my well-being and my future and not your own commission check.”

Trustworthy and dependable

Exemplifying that concern—and its positive outcome—is the experience of Charles Israel, a 44-year-old real estate professional and former life insurance sales lead. When he first sought out the financial professional with whom he’s worked for the past decade, Israel says that “besides having a strong moral character and knowledge of the markets, I knew I would want to work with someone who is familiar with and has other clients in my age bracket. People in different phases of life require different investment strategies, so I wanted someone who knows and will recommend what’s best given my time horizons.”

In addition to that, Israel says, “I want someone who will think outside the box and bring me investment ideas rather than a simple mix of funds to add money to and forget about.”

The result is a relationship that is built on trustworthy and dependable service. And that’s the key to working with Gen Xers, says Suzanne Schmitt, head of financial wellness at New York Life.

“While Gen X households may vary, it’s imperative to have access to trusted, professional guidance, along with a well-rounded financial strategy, to understand priorities, address current and potential barriers, and help individuals and their families along their unique financial journey.”

Reinforcing that point of view, generational expert Mary Donohue urges financial professionals to pay close attention to Gen Xers. Giving them that attention, she says, may result in a steady stream of interest and investment.