18 July 2018
Why it pays to target Generation X
Firefly Wealth money mentor Adele Martin used to part-own an advice business that targeted retirees: Baby Boomers and their predecessor, the Silent Generation.
Clients were happy but as they consumed their capital, revenues fell.
Martin found the business development that was necessary to win new clients to fill the revenue shortfall was draining. And so she realised it made more sense to work with younger wealth accumulators who would stay longer on the client book.
Like many of her peers, she began targeting Millennials, the 20-to-30-somethings often touted as the golden ticket for advisers looking to futureproof their businesses.
But she also worked actively to attract Generation X. And if you’re not already focused on this demographic, you should be. Just 17 per cent of Generation X use an adviser, but they hold 36.2 per cent of Australia’s superannuation assets, as reported by Roy Morgan Research in its Single Source Survey. And they’re getting richer by the day as they raise families and consider retirement.
A cohort of quiet achievers
Low profile, but typically well-established, the generation born between 1965 and 1980 are now in their peak years of earning and wealth creation.
With more than a decade until retirement, and 30-plus years of life expectancy, older members of Generation X already have wealth approaching that of Baby Boomers.
Yet many in Generation X go unadvised and 83.8 per cent rely on their employer to pick their superannuation fund, according to Roy Morgan Research.
Xers are in need of financial advice
It’s not that Generation X is avoiding financial advice, says Martin: “They want advice, they just want someone they can trust.”
Only one-in-four Australians trust financial planners, Roy Morgan Research shows. That proportion has not changed since 2009, despite reforms designed to improve the sector.
Martin says individual advisers must earn the trust of Generation X, who are in need of assistance now.
More than half of 38-to-53-year-olds fear they won’t have enough money to retire on, and 44 per cent find it difficult to plan their lives, Financial Planning Association research found.
Many are underinsured, with debts and families to support. Credit-card debt can also be an issue with almost one quarter carrying a balance of more than $5000, according to research by Finder.com.au.
With retirement appearing on the horizon, Generation X needs to balance life against saving for the future, Martin says.
A personal connection is what it takes
Take Anna, one of Martin’s long-time clients. At 52, Anna is an older member of Generation X. She’s starting to think about retirement but also has short-term priorities.
“I want to be able to live like I do now when I retire. I don’t want to have to scrimp and save,” she says. “I like my holidays. I want home improvements, to upgrade my car in the next few years. Adele is on top of that and explains how.”
Anna first met Martin in 1999, then a financial planner at RetireInvest Newcastle, after being made redundant from a job with Telstra. When Martin branched out on her own, Anna followed. She is still a client now almost 20 years later, and a strong advocate for financial advice.
As with any client group, referrals are invaluable for advisers looking to reach Generation X. Existing Generation X clients, such as Anna, may refer their peers. Older clients may have Generation X children who need help.
Martin finds social media useful in reaching and keeping clients in this demographic. She moderates Facebook groups where community members discuss financial topics, and share budgeting and saving tips. Emails and blog posts also augment the relationship between one-on-one meetings. This frequent interaction helps develop trust, Martin says.
Advise this generation on their terms
While frequent contact is good, it must be convenient.
Martin allows clients to book appointments online and have virtual meetings. “That way they don’t have to drive to see me, look for parking, figure out babysitting,” she says.
Clients want financial education, so Martin offers online videos they can watch at their leisure. Popular topics include eliminating debt, cash flow management, starting a side-business, and returning to work after kids.
What Generation X doesn’t want is to be sold life insurance, Martin says. Underinsurance is a huge issue for this age bracket but cash flow is a more pressing concern.
“Often all [the life cover] they have is the insurance in their super fund and that’s not enough,” Martin says. “What they’re scared about is: how are we going to afford it?”
Generation X is receptive to holding insurance. Roy Morgan research shows more than 90 per cent have general insurance, such as home and contents, car, and pet insurance.
Advisers need to identify strategies that allow Generation X to fit life cover into their budgets. That might mean holding income-protection insurance inside superannuation, for example.
“If you show them how they can afford [life insurance], they want it,” Martin says.
Advisers who can earn the trust of Generation X, and provide them with practical and convenient guidance on how to achieve their priority goals, will win clients in this lucrative and under-served demographic for life.
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