From Registered Rep:
Over the last year or so, advisors have been struggling to get their clients out of cash, but how much cash are clients really holding? Investors say they’re holding 27 percent of their investable assets in cash, according to an MFS Investment Management survey of 929 investors. Generation Y investors lead the pack, allocating 33 percent to cash, up from 30 percent in February. Guess what financial advisors who were surveyed thought their younger clients held in cash? On average, advisors surveyed believe Generation X/Y investors held 10 percent in cash. Babyboomers? FAs thought boomers held 14 percent in cash.
Generations X and Y have a combined $2.6 trillion in spending power and are larger than the baby boomers, according to Iconoculture, but they’re more focused on saving than investing their money in equities. Fifty percent of all investors surveyed said they were a “saver” more than an “investor,” with 63 percent of Gen Y respondents answering this way.
At some point it’s almost inevitable — Gen X and Y are going to become the Scarface of investors, “In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women.”
And right now, the younger generation has the money & they have the time to wait for the aging boomers, who are woefully undercapitalized to fund their impending retirement. At some point, the reality will sink in. The boomers are going to need Gen X and Y to legislate some solutions for them to live on something other than cat food. Especially when the average net worth among the Baby Boomer is about $144,000 (and that’s as of 2006).
The reason Gen X and Y are so cash-heavy is almost the perfect irony. It’s the result of years of having their concerns pushed aside for wants and needs of the massive Baby Boomer army, being constantly reminded about the perfect alignment of stars giving the Boomers such a demographic advantage. It’s the result of Gen X and Y coming of age in a recession (and another, and another). It’s the result of being told repeatedly that they might be the first generation that is not going to be better off, or even live longer. They grew up hearing about how awesome the 60’s were for sex, drugs & rock-n-roll and that the 80’s and 90’s sucked.
But now the tables are turned, and all of the chaos & cuts left in the wake of the Boomers coming of age party for the last 30 years have left Gen X and Y lean & mean, ready to accept 1% on their CDs for the rest of their investing lives. It’s left them more entrepreneurial and self-sufficient.
It’s not going to happen overnight of course, but mark my words, when these 30-somethings start taking public office, you can count on them remembering when the Baby Boomers called them Slackers. And that is going to be the moment, when the student becomes the teacher, the child the parent; remembering all of those spankings instead of the time out chair.
It’s going to be the moment when the latchkey kids remember why they were left home alone: mom and dad were chasing the dream of a timeshare in Cabo & another leased 5 series. The Slackers are going to remember the lectures about finishing their Kraft Macaroni & Cheese and hot dogs while people in China were starving.
Oh, how the tables have turned indeed.
So, if you’re a Boomer, I’d start now. Start being a little nicer to your kids, start getting super religious about saving money. Because the Slackers are grown now and they have their own kids to take care of — and now they’ve got cash; next is the power…
And you remember how nasty Scarface was once he got the power, don’t you?