As baby boomers enter their retirement years they're being advised to act their age. What are advisors telling them?
Millionaire baby boomers are being advised to invest more cautiously – advice that aligns with boomers’ move into retirement during uncertain economic times.
An estimated 77 million Americans were born in the boom years between 1946 and 1964. Sometimes described as the “bulge in the python,” baby boomers have shaped the economy and society at every stage of their development. The oldest members of this generation are now turning 65 and, as they reach and exceed retirement age, their investment goals appear to be maturing as well.
Millionaire baby boomers - defined as having a net worth of $1 million to $5 million not including primary residence - say their advisors are encouraging them to develop a more conservative portfolio, weighted more to stocks than to bonds, and to seek out tax-free investments. More than 30 percent say their advisors are urging them to hold their investments in something safe “until things get better.”
Younger millionaires, those ages 54 and younger, are more likely to be advised to invest more aggressively. Our October survey shows younger millionaires are most likely to be advised to reduce their debt levels and plan for long-term care costs.
Older millionaire baby boomers work more closely with advisors than their younger counterparts and report long-standing relationships with their financial professionals. About 82 percent of millionaires age 55 and older report working with an advisor, compared to 73 percent of younger investors. About 22 percent of the 65-plus group says they have worked with their advisor between 10 and 15 years, and 24 percent say they’ve worked with their advisors for 15 years or more. This older group is also the most likely to be satisfied with their advisor and to continue their relationship with their advisor.
Younger investors are the most likely to report a bad experience with an advisor in the past (38 percent) and also most likely to be decreasing their reliance on an advisor (17 percent). The youngest Millionaires – those age 54 and younger – control nearly 60 percent of their assets with no professional help. They consult a professional regarding another 30 percent and allow an advisor to handle about 1o percent.
Older millionaire baby boomers – those ages 55 to 64 - are most likely to be transitioning more of their assets to a financial advisor. Twenty percent of the 55 to 64 group say they have worked more with an advisor because of the recent economic crisis. Older boomers allow an advisor to completely control 17 percent of their assets, and consult an advisor over another 40 percent. They control about 44 percent with no professional help. Millionaires age 65 and older have a strong preference for working with a full service broker. Those age 55 to 64 use full service brokers to a lesser extent, but show the strongest preference for an independent financial planner or an investment manager.
Morgan Stanley Smith Barney stands out as a favorite with investors age 65 and older. The youngest Millionaires – those age 54 and younger – show the greatest preference for Bank of America-Merrill Lynch, Fidelity and Charles Schwab. The top banks used by Millionaires of all ages are the industry giants, Bank of America, Wells Fargo, and Chase-JP Morgan.