Marketing to Generation X & Y is by far more of a challenge than reaching Baby Boomers since members of these groups pride themselves on their individualism, shun traditional media in favor of splintered social networking, have become distrustful of financial services companies and investing following the recession, and are conservative investors who are fearful about their retirement prospects and more concerned about their present needs.

And yet, Gen X/Y is a formidable group in terms of its size, according to data from the Investment Company Institute.

While the Baby Boom generation, the 77 million Americans between the ages of 47 and 65, hold 56% of all mutual fund assets, Generation X (those between the ages of 30 and 46) and Generation Y (those between the ages of 18 and 29) comprise 80 million Americans who hold 36% of all mutual fund assets.

Yet these younger investors have become extremely sensitized to investing following the market crash of 2008, a survey of Generation X & Y investors with at least $100,000 to invest by MFS Investment Management in November shows.

"Our results show confusion for Gen X/Y investors, with many considering themselves to be savers, not investors, and looking to their investments to generate income instead of capital appreciation for long-term goals," said Bill Finnegan, director of global retail marketing for MFS. "In addition, they have accumulated a fairly significant amount of wealth but don't have a strong affinity for or with financial advisers. Gen X/Y doesn't show strong confidence as investors. They seem scared of equities, confused about government bonds and more focused on income. This potentially stacks the deck against them to meet long-term goals and points to a need for financial advice regarding the establishment of a long-term financial plan, investing basics and budgeting."

Sixty-six percent of Gen X/Y said they are overwhelmed by all of the different choices available to them, and 35% agreed with the statement, "after what has happened in the markets the past few years, I'll never feel comfortable investing in the stock market."

Further, 30% of the Gen X/Y that MFS surveyed said generating income was their most important investment objective, compared with 20% of Baby Boomers. And 28% of Gen X/Y said protecting principal was their most important objective, compared with 18% of Gen X/Y'ers who said so in 2007 before the recession.

And Gen X/Y doesn't expect to have a comfortable retirement, with 58% saying they are more concerned than ever about being able to retire when they thought, and 48% expecting they will have to lower their lifestyle in retirement. In addition, 48% have no idea how much of a nest egg they will need to retire.

Further, Gen X/Y is split on their outlook for long-term investing, with 35% confident the stock market will deliver adequate returns for them to retire, but 28% not confident in its prospects. Thus, while 30% of Gen X/Y have increased their contributions to their retirement savings since the recession, 14% have decreased contributions.

"Gen X/Y are more confused about investing than older generations," Finnegan said. However, on the bright side, the recession has made 36% more receptive to financial advice since the downturn.

Taking this kind of personal, practical approach apparently resonates among this group. More than other consumer groups, Generation X and Y respond to emotional, direct advertising, said Tom Dougherty, president and CEO of branding research firm Stealing Share. This is why social media is so important to these younger investors, Dougherty said. "They want to be around people like themselves, to create their own world," Dougherty said. He recommends that mutual funds try to speak to this target group individually, in the first person, on social media.

"For Generation X and Y, a great brand is delivered in the first person because these customers don't choose benefits; they choose themselves. Discover what your customer wants," Dougherty said. "That is how to define your brand so that it becomes resonant and important to this target market."

Alex Sion, vice president of digital strategy at marketing consulting firm Sapient Nitro, agrees that Gen X and Y is very skeptical of investing but believes that because they are very motivated to get their financial house in order, they are receptive to education and practical messages.

But unlike Baby Boomers, many members of Gen X and Gen Y have written off the idea of someday retiring, so a better message to drive home to this group is to help them with more immediate financial goals, like saving for a house or their children's education, Sion said.

"It's important to paint a picture of an investing rationale," he said.

In addition, it is imperative to disseminate messages through multiple social networking channels since Gen X and Y is hooked on social media, multi-tasking and the visual stimulus of video games, Sion said.

Michael S. Cocco, a 28-year-old producer and divisional vice president at AXA Advisors, relies heavily on constant e-mail communication with his clients, about two-thirds of whom are Gen X and Gen Y. In addition, social networking has become Cocco's "bread and butter in attracting new clients." 

Thus, Cocco sends his 1,600 Facebook friends and 900 LinkedIn contacts a timely AXA compliance-approved e-mail every quarter through E-Relationship™ - an email connection tool AXA uses for connecting its financial professionals with their clients and prospects. But these e-mails, as well as the AXA messages he re-tweets on Twitter, are focused more on educating his clients than on selling to them, Cocco stressed.

This kind of one-on-one reach is specifically why OppenheimerFunds in the last six months has launched informative micro websites and videos on YouTube, Facebook, Twitter and iPhones specifically to reach a younger generation of financial advisers in their 30s and 40s.

On Feb. 1, Oppenheimer debuted a new advertising campaign called "Globalize Your Thinking," comprised of presentations delivered through social media that these younger financial advisers can then deliver to their investors. That's because gone are the days when customers and financial advisers will go to a company website, explained Diane Frankenfield, senior vice president of digital strategy at OppenheimerFunds.

"Historically, we relied on television and print advertisements and our website," Frankenfield said. "We are now benefitting from the ubiquitous reach of the Internet by making digital advertisements the center of how we go to market. We have come up with a strategy to inundate our content over many forums, including mobile phones."

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