Cogent’s “Emerging Investor Trends” study looked at affluent (having at least $100,000 in investable assets) Generation Y/Millennial and Generation X investors. Linda York, vice president of Cogent Reports, tells PLANADVISER, “More Millennials feel optimistic about the investing environment (47%) than their Gen X counterparts (26%). In terms of overall financial priorities, for the Gen Xers it’s saving up for and funding their retirement. For Millennials, their priorities are saving to make a major purchase or just saving in general, though not with a specific aim of retirement.”
Millennials also have shorter-term goals when it comes to saving, she says, such as paying off debt or purchasing a home.
The Cambridge, Massachusetts-based York adds, “Forty-four percent of Millennials are investing in low-risk investments, which is a higher percentage than their Baby Boomer counterparts. Gen Xers, on the other hand, seem to have a higher tolerance for investment risk. Almost half (43%) are investing in moderate-risk investments and over one-quarter (27%) are investing in high-risk investments.” Part of the difference, she explains, is that since Gen Xers are not saving for shorter-term purchases, they have a longer time horizon to work with and more room to recover from risk-generated losses.
Another difference between Millennials and Gen Xers is where they are putting their money. More than one-third of Gen Xers (36%) are investing their savings in employer-sponsored retirement plans, allocating the most they can to them, while more than one-quarter of their Millennial counterparts (26%) are keeping their assets in bank accounts.
With these difference in mind, York says other Cogent research shows employees overall find it useful to have access to a retirement plan feature offering personalized investment advice. However, York contends this may be used more by Millennials, since Gen Xers are more about managing assets on their own. York notes that more than half of Millennials say they would like to meet with a financial adviser for some in-person finance advice. “Gen Xers would benefit more from investment vehicles designed for longer-term investments, as well as investment modeling tools that they can use themselves, since these employees are more self-directed,” she says.
With Millennials, the higher priority for employers is just getting them started with the plan, says York. “The key here is to get these employees established in the plan through features such as automatic enrollment and automatic escalation. Then, when they’re ready later, they have a foundation to build upon. Just make it simple and something they can come back to.”
To communicate with employees about retirement plans and saving, York says email seems to be the preferred method across all age groups. The demand for printed materials seems to be decreasing even among Baby Boomers.
Cogent's recent study was carried out between February and April among 2,882 affluent investors. More information about how to purchase the results of the study can be found here.