Gen X is the first generation to lose several retirement benefits the previous generations had taken for granted. It’s the first generation that can no longer rely on employer pensions for a secure retirement, and will be the first generation unable to rely on full Social Security benefits, which are on track to be depleted in 2034, according to the Social Security Administration’s 2015 report.
All things aside, it is too early for Gen Xers to give up on retirement security. After all, Gen X’s best earning years are still ahead. In fact, according to Deloitte Consulting, Gen X will experience the highest increase in share of national wealth through 2030, growing from under 14 percent of total net wealth in 2015 to nearly 31 percent by 2030, and overtaking baby boomers as the wealthiest generation shortly after.
So how can Gen Xers reach their retirement goals? Sadly, 40 percent of Gen Xers do not have a strategy for retirement and only a little more than one-third (39 percent) of Gen Xers work with an advisor, according to a TransAmerica Center study conducted in 2016.
This may not be surprising when you consider that Gen X was the first generation that had to work their way through employer 401(k) plans. It’s natural to be wary of fees and expenses associated with an advisor when you think you can do it all on your own.
However, retirement is more complicated than most people think, and Gen Xers’ confidence in their ability to manage their own finances may be impeding their chances of reaching a fully secure retirement. Gen X needs to set a vision for retirement and develop a plan for realizing it. They also must recognize that an advisor’s expertise can be critical in keeping investors on track and helping them reach their goals.
With a majority of wealth managers offering seemingly similar services, it is likely that when the forever-skeptical Gen Xers look at the wealth advisor space, they don’t immediately see what differentiates one financial professional from another.
But not all financial professionals are the same, and Gen X should know whether they’re dealing with wirehouse representatives, brokers, registered investment advisors or other financial professionals.
One of the first things to do before engaging with an advisor is to determine what kind of relationship you, as an investor, want to have with your advisor. For some investors, a transactional relationship is sufficient, while others may want a deeper, more inclusive, advisory-based relationship.
If you are looking for an advisory-based relationship, the first thing to understand about your financial professional’s credentials is whether he or she is a fiduciary — and whether he or she is a fiduciary all the time.
A fiduciary means the advisor is legally bound to put your interests first. This fiduciary concept now applies to all advice given on retirement accounts, due to the Department of Labor’s fiduciary rule. That said, it is important to understand your financial professionals’ credentials and the full scope of their activities and affiliations, as well as how they are compensated, to ensure they act in your best interest across all accounts.