With upwards of $27 trillion in assets and comprising close to half the US population, Generation D is undeniably a viable and growing market segment for the financial services industry. The problem is, according to Accenture’s research much of the industry either doesn’t know about this potentially lucrative group of investors or has failed to take the right steps to build a strong relationship with them—a relationship based on Generation D’s unique characteristics and needs.

Significant wealth, eroding confidence, and a compulsion to learn

In my previous post, I introduced you to the cross-demographic but behaviorally cohesive group of investors dubbed Generation D (or Gen D)—a mix of one-quarter Baby Boomers, one-half Generation X, and one-quarter Millennials. Now I’d like to explore not only Gen D’s common characteristics, but also the subtle differences between the sub-groups within Gen D. Understanding those differences is critical to making the most of the Gen D opportunity, especially as the population’s needs shift over time.

At the highest level of shared characteristics, Gen D is a powerful force in the financial services industry because it demonstrates:

  • Significant wealth and a deep commitment to investing as a means to grow that wealth
  • Eroding confidence in financial advisors, thus its members actively participate in their own investing
  • A compulsion to gather investment information and build knowledge to help mitigate risk

Overall, Gen D can be described as a potentially very lucrative group of information-seeking, risk-averse investors that likes to be hands-on with their investments—and they accomplish that through digital channels. However, a closer look at the Gen D sub-groups—the Boomers, the Gen Xers, and the Millennials—reveals that there are differences of degree with regard to each of their shared characteristics.

Differences make a difference

Millennials only hold a five percent share of the group’s wealth, but that will change over time—as they stand to inherit from their Baby Boomer grandparents and benefit from an improved economy.  However, Baby Boomers’ extended life spans and potential draw downs on their savings will be an influencing factor. Not only that, Millennials have a deeper commitment to sharing wealth with their heirs than their grandparents do. Furthermore, the wealthier and younger these investors are, the more eager they are to learn about investments from a variety of sources—but they want those sources to be digital. Lastly, Millennials are the most risk-averse in the group (43% are self-described conservative investors compared to 31% of the Boomers).  Financial services providers who have the forethought to develop and nurture investment strategies for this small but growing sub-segment could realise significant benefits in the future.

And while it might appear from the research that distrust has doomed the role of the financial advisor, many Boomers enjoy trusted relationships with their advisors. They appreciate online investment channels, but those are not as important to them as they are to Millennials. Lastly, despite cynicism about the economy, Boomers still have confidence in their financial advisor’s judgement. With the highest income and net worth of all the sub-segments, this segment continues to require some degree of a personal touch.

Interestingly, while the Gen Exers comprise the largest portion of the group, they are the most jaded in terms of confidence in the entire investment environment and are the least interested in expanding their knowledge. They also take a middle-of-the road stance in terms of social media and online involvement.

Repairing the disconnect

The disconnect that has prevented much of the industry from taking advantage of the larger Gen D opportunity is based on a complete misread of what motivates this group, accompanied by a misunderstanding of Gen D’s investment style. The good news is, much of this disconnect can be resolved by giving Gen D what they’re asking for in general—robust, collaborative online education and investment tools and resources that allow them to make better investment decisions while building trust between themselves and the financial services community.

In my next post I’ll share how financial services firms and their HR teams can better meet the needs of these valuable customers, as well as how to mine the untapped resources of Gen D within the current employee base.

For more information, please see:

Generation D: An emerging and important investor segment

Trend two in the Accenture Technology Vision for Insurance 2016 report – Liquid Workforce: Building the workforce for today’s digital demands

Submit a Comment

Your email address will not be published. Required fields are marked *