Advisers not Doing Enough for Affluent Gen X Investors

April 27, 2011 ( - Affluent investors with advisers in the Gen X demographic – between the ages of 29 and 44 – saw significantly less growth in their portfolios than those without an adviser last year.

A Cogent Research study found that overall, Gen X affluent investors witnessed their investable assets grow by roughly 11% in 2010. Self-directed affluent Gen X investors – those who rely solely on their own knowledge and judgment – experienced 28% asset growth in 2010, while their peers who turned to a financial adviser reported that their investable assets climbed only 3% during that same time period.   

This discrepancy in asset growth between advised and self-directed investors in Gen X is an anomaly; advised investors in every other age group measured in the study (1st Wave Baby Boomers, 2nd Wave Baby Boomers, and Silent Generation) were able to outperform their self-directed counterparts during the same time period.  

Therefore, it should not come as a surprise that less than half (42%) of advised affluent Gen X investors indicate they are satisfied with their primary financial adviser, a figure that is significantly lower than that of any other generation. In addition, roughly one-half (51%) indicate they are the on the fence or likely to switch primary advisers within the following 12 months – also significantly higher than for any other age group.   

When asked to explain why they would be likely to switch primary financial advisers, Gen X investors cite dissatisfaction with the adviser’s communication, investment performance, and ability to navigate and react to changing market conditions.

Portfolio Differences  

Cogent Research found that self-directed Gen X investors have a greater allocation in equity-based products, such as mutual funds, offering greater reward along with greater risk. Their advised peers’ assets are allocated more heavily to lower risk/lower return investments (i.e., bonds) or products that are traditionally associated with extra fees and commissions (i.e., annuities).   

“The discrepancy between advised and self-directed investors does beg the question as to whether advisers are re-purposing investments strategies designed for older investors with lower risk tolerance or whether they’re simply not paying enough attention to the unique needs of the this younger cohort,” said Steven Sixt, Project Director at Cogent Research and co-author of the study, “but either way, advisers are taking a big risk of alienating a generation of investors that are already inclined to go it alone,” he added.  

Affluent Gen X investors represent roughly one-fifth (18%) of the overall affluent investor community and have acquired approximately 75% of the total investable assets of 2nd Wave Baby Boomers (ages 46 to 54). Yet, according to Cogent Research data, Gen X investors tend to have advisers with the lowest tenure and smallest books.   

“It’s time for advisers to capitalize on this growing, wealthy subset of the affluent community,” said David Feltman, Managing Director at Cogent Research. “However, tailoring the approach will be key, with a focus on the products Gen X investors favor, the risk tolerance they are comfortable with, and the platforms they gravitate towards.”  

The study is based on an online survey of 4,025 affluent investors, including 738 affluent Gen X investors between the ages of 29 and 44.


-Nicole Bliman