Thursday, October 10, 2013

Danger Ahead for Gen X and Y!

A lot of attention is being paid to generational differences between the wealthy, particularly the differences between prosperous Gen X and Y’ers, and their boomer parents. Several recent studies have looked into this, notably the Fidelity Millionaire Outlook, which looks at the financial behavior of millionaires of different generations.

Understandably, the younger generation wants to find their own path. I’ve experienced this firsthand, with two of my kids. When they each bought a house, they chose their own agents, and their own mortgages. I was more than willing to help with my professional expertise, but they wanted to make their own choices.

The danger is that this deep level of engagement, which is fantastic, is often not matched with a deep knowledge of financial matters….and that, like all people, Gen X and Y’ers tend to be trend followers. Without the benefit of professional advice, they may be more likely to buy high and sell low—and see the financial damage that results.

Some of the Fidelity study results bear this out. It’s really easy to feel knowledgeable and successful in an up market like the one we’ve been experiencing. Mistakes are masked…if you’re in the market, you’re most likely making money. The study shows that Gen X and Y’ers are making an average of 30 trades per month…probably following the advice of pundits like Jim Cramer.

These folks are paid to make bold and knowledgeable-sounding predictions…but they aren’t paid by how accurate those predictions are! I would advise investors to look at sites like, which tracks the performance of pundit recommendations. I’d also suggest that they read a great whitepaper produced by Davis Distributors, Timeless Strategies for the Successful Investor.

Predicting the day-to-day movement of the market is next to impossible…and a high level of self-directed trading is, to me, a huge red flag. Many of my current clients are former self-directed investors, who did some damage to themselves, and then luckily realized in time that they needed professional help.

If you’re looking for a financial advisor, I’d suggest that you check out the Consumer Advocacy page on our website. There are many types of advisors, and they are not all created equal!

Gen X and Y’ers are correct to shy away from commission-based advisors who get paid based on the products they sell you. But, professionals can help you avoid getting hurt by the next market downturn. Picking a NAPFA-certified, fee-only, fiduciary financial advisor, whether that’s Wade Financial Group or another firm, is the best move you can make…and then you can focus on your career and family!

--Jerry Wade, CFP®, CFS
Chief Investment Officer
Chief Wealth Advocate 

UPDATE: Jerry Wade was interviewed on WCCO radio on this subject on Thursday, October 10. Listen to the full audio.

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