State Street's Allison Bonds on the Generational Opportunities for Advisors | ETF Trends

Millennials appear more optimistic about putting money into the markets, while Generation X isn’t keen on the current environment, according to a survey released earlier this week by State Street Global Advisors. But Allison Bonds, State Street’s head of private wealth management, believes Gen X may need the most help with their investing, and advisors have a chance to fill that gap.

Bonds spoke with VettaFi contributor Dan Mika on the generational differences in State Street’s latest research and what that means for financial advisors.

[This interview has been edited for clarity and length.]

Allison Bonds, State Street Global Advisors

Dan Mika, VettaFi: About half of millennials say it’s a good time to start to put money into the market right now compared to 34% of Gen Xers and 24% of the baby boomers. Can we attribute this to millennials having a longer time horizon to work with? Or is there something else at play?

Allison Bonds, State Street Global Advisors: I think millennials naturally have the glass-half-full mentality. They sort of have an optimistic view of the world, and they know that they have a longer time horizon and can sort of withstand some of the volatility in the market.

VettaFi: We also see this spread between the three generations when asked if they’re comfortable with the highs and lows of financial markets. Do you attribute that to the age difference? Or is there some other generational aspect that may make Millennials feel more comfortable seeing the markets rise and fall every day?

Bonds: I’m not sure about millennials beyond just that sort of glass-half-full mentality, being more optimistic, and having a longer runway. But I can speak a bit more about Gen X because I am a Gen Xer.

I found it fascinating to look under the hood of the survey results that Gen Xers were the least likely to use a financial adviser, but I actually think that they are a generation that needs financial advice the most. Colloquially, Gen X is termed the “sandwich generation” and is understood to be people that were born between 1965 and 1980. In many cases, they’re sandwiched between taking care of younger children at home under the age of 18 and potentially caring for aging parents. Then they’re also strapped with trying to fund their retirement. They have a lot of financial responsibilities, and they potentially need more financial advice or financial advice more than other generations.

It sort of begs the question, knowing all of the financial responsibilities that they have, why would they, in the survey, be less likely to use a financial advisor? In their early wealth-building years, they had a front-row seat to the tech bubble. They saw companies with no earnings with a buy rating, any company that in its name with a buy rating. And then they saw the subsequent wealth erosion. That’s difficult for any generation to go through, which was very early in their wealth-building years. Less than a decade later, they went through the housing bubble and the subsequent credit crisis, seeing NINJA (no income, no job, approved) loans and the subsequent wealth erosion. 

It’s not surprising that Gen Xers, more than other generations, might be more skeptical of financial advice, feel burned by financial institutions, and be more apt to be do-it-yourselfers.

I also found it fascinating that of all of the generations, they listed inflation as a top concern; 88% of them said that inflation was a top concern. And if you think about it, (when the latest) CPI came out, we continued to remain near 40-year highs for inflation last month. We haven’t had inflation this high since the last Gen Xer was born. They’ve never experienced anything like this.

VettaFi: On that point, you made about Gen Xers having a front-row seat to the dot-com bust: do you think there might be some parallels to the market in 2020 and 2021, where tech was going on a huge roll and meme stocks were rising?

Bonds: I think that’s fair. And I think it probably harkens back to the earlier experiences they may have had, again, in the (early 2000s) and then from 2008 to 2012.

VettaFi: On the aggregate, I noticed that about 31% of the respondents for this survey said that they are okay with the highs and lows of the financial market versus 33% in April 2020. That’s not a huge spread, but it is interesting to see that a couple of respondents say that they are less okay with the current volatility in an environment where COVID is more under control versus April 2020, when it felt like the world was falling apart.

Bonds: During the first survey, the market was up, so you’re more comfortable with the highs and lows of the market when you’re experiencing more of the highs. With the more recent survey, we know what the market has been doing, and you’re less comfortable with the highs and lows of the market when you’re experiencing the lows.

VettaFi: Also in this survey are figures showing more than 90% of the respondents said that they value guidance from their advisors, and 86% say that their advisors are helping them remain confident. In your conversations with advisors, how confident do they feel in being able to provide advice that meets their client’s needs in this current market and economic environment?

Bonds: I think it’s probably never been more challenging to be a financial advisor and keep people cool, calm, and collected with all of the volatility. I think if last year was about buying the dip for many investors, this year is about waiting and seeing. I really give a lot of kudos and credit to financial advisors that, based on this survey, are helping their clients remain more confident in the markets in that old adage of time in the markets, not timing the market.

I think the current environment may provide an opportunity that financial advisors haven’t had in the past: to show Gen Xers the value of advice and perhaps to change that narrative that Gen Xers tend to be more do-it-yourselfers, that they don’t use or need financial advice. I think that this could be an opening for financial advisors to show just how valuable their advice can be to this generation during this period of heightened volatility and high inflation.

VettaFi: What would be your advice to advisors on demonstrating that? If there’s a sense that Gen Xers have a historical distrust of financial advice and institutions from seeing the dot-com bubble, how do you capitalize on the opportunity to convince them otherwise?

Bonds: If we know that Gen Xers want to have more control over their portfolios, there’s a way to approach that. They like to be independent and might be more skeptical, but they need advice. I think there’s a way to approach that generation in more of a collaborative partnership with their financial advisors.

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