BMO Finds Demographic Differences in Investing Preferences

Respondents across all three generations cite saving and investing for retirement as their primary financial goal; however, Millennials are less inclined to buy and hold for the long term.

BMO Wealth Management released a new report focusing on the attitudes and behaviors voiced towards saving and investing across generations, appropriately titled “Generational Perspectives: How Millennials, Gen-Xers, and Baby Boomers Save and Invest.”

The report is based on a survey of more than 1,000 working-age Americans, and according to BMO researchers it reveals compelling insights about the differences and similarities among generations, while also highlighting key distinctions in the way men and women save and invest.

Tania Slade, U.S. national head of wealth planning, observes that nearly 60% of respondents across all three generations cite saving and investing for retirement as their primary financial goal. In addition, respondents in every generation indicated that a diversified portfolio approach is their top method for investing.

For investment preferences—with or without assistance—respondents across generations were again in agreement, Slade says, choosing most often to rely on the guidance of an adviser at a financial institution. Millennials reported heavier use of robo-advisers (10%), with Generation X coming in a close second at 9%—compared to just 5% of Boomers.

Women surveyed were slightly more conservative investors than men, BMO reports, as 19% of women prefer to invest in individual stocks, compared to 25% of their male counterparts. Further, 16% of women say they invest in certificate of deposit (CD) accounts and money market securities, compared to 12% of men.

Data from BMO shows basic generational differences when respondents who neither save nor invest regularly were asked to explained why. Twelve percent of Millennials “worry too much about losing money,” compared to only 7% of Boomers. Meanwhile, 18% of Millennials “admitted it is too complicated,” compared to just 8% of Boomers.

“When asked what they find confusing about investing, 21% of Millennials cited discomfort from a lack of understanding of the markets, a reason cited by just 12% of Gen Xers and 10% of Boomers, BMO’s report explains. “Sixteen percent of Millennials indicated they don’t know what their investing options are, a reason cited by 13% of Gen Xers and only 7% of Boomers.”

BMO urges retirement savers “not to turn a blind eye to assessing the right plan for your life.”

“With each contribution you’re making an investment, so ensure it’s the best investment based on your age and your retirement goals,” Slade concludes. “That means drafting a plan and knowing how much you’ll need once you retire. Also, as major life events occur (such as getting married or buying a home), reevaluate your plan and adjust your contributions accordingly.”

Other findings from BMO show there is “an important distinction to be made between saving and investing,” but these two terms are often used interchangeably. BMO researchers draw the distinction as follows: “Saving is the act of setting aside funds for a purpose other than day-to-day spending. Investing involves earning growth from these funds that can be used to accomplish chosen goals. Savings occur in the short term, while investing is a longer-term discipline to make the most of savings over time.”

Survey participants were asked to describe their saving and investing preferences. BMO says it is interesting to note that respondents were “usually on one side or the other of this short-term vs. long-term approach to saving and investing.” When asked about their top three saving or investing options, a significant number of respondents chose short-term savings options that include putting the money aside to decide later (22%) and accumulating funds in a term-deposit or savings account (19%). Millennials were notable in that they were more likely to be short-term in their approach, as they were less inclined to buy and hold for the long term (32%) as compared to Gen Xers (40%) and Baby Boomers (43%).

The full report is available for download here