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Younger Investors Catching Up in Wealth

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Guess which demographic group is joining the ranks of the affluent the fastest?  No, not baby boomers. The rising wealth accumulators are Gen X and Gen Y investors, those under the age of 45.

This group accounts for one-third of all Americans with more than $100,000 in investable assets, up from 20% in 2010, according to Meredith Rice, senior project director at Cogent Research, a market research consulting group.

“Over the next couple of years we’re going to see more Gen Y and Gen X investors crossing the $100,000  threshold and becoming increasingly important for manufacturers and distributors,” she said during a webinar on Friday.

The webinar covered the major findings of the firm’s annual “Investor Brandscape” study on investor attitudes and behavior, which surveyed  4,164 U.S. households. 

With an economy on the mend and an improving market, investors’ confidence ticked up over the past year, as did their wealth, according to the study. Affluent Americans had an average net worth of $939,000, a 5% increase from 2011, and average investable assets of $510,000, up from $493,000 last year.

The level of wealth generally rose with age with the exception of Gen Y investors who had more wealth than their slightly older Gen X counterparts. Rice surmised that Gen Y investors may have inherited legacy or trust fund assets that allowed them to surpass slightly older investors in wealth.

In a sign of their growing confidence, affluent investors moved money off the sidelines, shifting out of low-risk investments and into moderate-risk investments. The one exception was Gen Yers, who put more money into low-risk investments, possibly out of a “wealth preservation mindset” or fear of market volatility, according to Rice.

On a negative note, fewer affluent Americans worked with a financial advisor in 2012, after a slight uptick last year. Almost two-thirds (65%) used an advisor in 2012, down from 68% in 2011. The downturn was driven by Gen Xers who may have experimented with the online advice model and weren’t impressed with the returns they were getting, Rice noted.

The one exception? Yes, Gen Yers.  Eight in 10 worked with a financial advisor in 2012. They were more likely to work with advisors in the insurance and bank channel, Rice said. 

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