MFS' survey identified several attributes about Gen Y that are cause for concern, especially as this group ages and takes on additional expenses and life goals.
Red flag: Lack of risk orientation
- 40% of Gen Y agreed with the statement "I will never feel comfortable investing in the stock market.”
- Gen Y investors agreed that they are likely to feel overwhelmed by all the choices they have (54%), put off investment decisions (47%), and consider themselves to be savers more than investors (59%).
- 30% of Gen Y said that their primary investment objective was protecting principal/not losing money, only marginally smaller than those who said their primary goal was growing assets, at 34%.
- Gen Y has allocated more money to cash than other age groups, at 30% on average -- nearly as much as they have allocated to U.S. stocks/stock funds (33%).
Red flag: Worried about debt, retirement; spending increasing
- 38% of Gen Y investors say they live paycheck to paycheck and that saving consistently is not an option.
- Gen Y investors were more likely than others to have increased spending on both discretionary (42%) and nondiscretionary (49%) expenses over the past 12 months and add debt as well (36%).
- 41% agreed that they were concerned about the amount of credit card debt their households carry.
- 54% of Gen Y agreed with the statement, "I'm more concerned than ever about being able to retire when I thought," and 44% agreed with the statement "I have lowered my expectations about the quality of my life in retirement."
"We've identified significant red flags. However, Gen Y has exhibited certain positive attributes that, over time, may help them transition to a less conservative approach," added Finnegan. "Gen Y investors are engaged with advisors, take an active interest in managing their portfolios, and are generally optimistic about their own futures."
Positive sign: Optimistic and engaged
- 64% and 78% are optimistic about the economy and their own five-year future, respectively.
- Gen Y is more likely than Boomers to say they are very knowledgeable/expert investors, 39%.
- 62% of Gen Y agreed that they enjoy investing.
Positive sign: Open to advice
- Of those who reviewed or rebalanced in the past 12 months, 89% of Gen Y, more than any other age group, reported an advisor playing a key role.
- 69% reported at least consulting with an advisor regarding investment decisions, more than other age group.
- 59% of Gen Y investors have received investment advice in the past 12 months, and 42% report an increased need for investment advice in the past 12 months.
Positive sign: Evidence of a disciplined approach
- 71% report they are disciplined about putting aside money for saving and investing.
- 52% report an increase in savings outside of retirement accounts over the past 12 months.
- 58% agreed with the statement, "Since the downturn, I prefer to pay with cash or debit cards as much as possible."
"Whether wealth is transferred to Gen Y from older generations or they generate it themselves, it is a demographic imperative that the financial services industry embraces younger investors," Finnegan concluded. "We've identified challenges and opportunities for Gen Y investors that financial advisors are uniquely qualified to address. However, they are operating in a business model geared toward serving older generations. Changing how they engage younger generations and helping them transition from conservative savers to long-term investors might just be the ultimate challenge for today's financial advisors."
