“Understanding the generational personalities could be a way to glean insight into ourselves and overcome innate biases. It’s also a way for financial services professionals to offer more relevant and customised advice that’s 100% focused on advancing our clients’ wellbeing,” says Guy Fletcher, head: client solutions & research at Sanlam Investments.
The 2018 Sanlam Benchmark survey revealed that employers estimate that, on average, only 14% of their employees will be able to maintain their current living standard when they reach the 60 to 65 age band. In that South Africans are not alone - in the US, nearly half of working-age families have no savings at all.
Here, Fletcher outlines the main traits typified to each generation:
Born between 1918-1944 (in their 70s, 80s and 90s), the silent generation is known for making some of the most significant strides of all the generations in terms of wealth, longevity and education. Having grown up amidst the turmoil of the Great Depression (1929 to 1933) and World War II (1939-1945), it’s synonymous with traditional values like loyalty and hard work, with tendencies towards frugality.
Investing style: This generation typically stayed in the same job for 40 years to get that coveted gold watch. They adopted a very disciplined approach towards their work and careers with a high level of respect for authority. The same approach applies to their investing style: they tend to follow the advice of ‘experts’, pick an investment portfolio and stick with it.
A Sanlam survey of 350 baby boomers, gen X-ers and millennials found that most baby boomers (born 1945-1964 - in their 50s, 60s and early 70s) are prioritising saving for retirement – which makes sense given their age and life-stage. The legacy of World War II instilled a similar sense of selflessness and ‘do the right thing’ values in the boomers. This generation puts great stock in hard work and links its identity to respect and success earned in the workplace.
Despite boomers having ‘had it easier’ – they earned twice what millennials earn now at the same age – they haven’t been the best savers and many retirees are starting side hustles to supplement their retirement incomes. Especially in South Africa, where grandparents frequently support their grandchildren.
Investing style: Like the silent gen, boomers tend to have a buy-and-hold mentality. Additionally, boomers’ ‘my home is my castle’ mindset means many have invested in property.
X-ers (born 1965-1980 - in their 40s, and early 50s) grew up in homes where dual incomes had become the norm. With a yes-we-can approach, this generation became synonymous with mass consumption, Wall-Street levels of opulence and ‘Keeping up with the Joneses’ aspirational lifestyles.
They’re also a generation that’s been impacted by increasing divorce rates. It is disturbing to note that, despite a need for self-sufficiency, within South Africa women fare worse than men on retirement planning. In a recently published survey, over 43% have no plan and only 40% of women have savings of any kind at all. In the Sanlam survey, Gen X – also known as the sandwich generation due to supporting both parents and kids – were the least optimistic about having enough for retirement. This means X-ers will either need to keep working after retirement or lean heavily on the state.
Investing style: X-ers are sophisticated and tech inclined, with increased openness to risk. They have tended to follow a more growth-oriented as opposed to income-based strategy. They have also been open to investing outside of their home markets and understanding the value of diversification. However, the downside of this aspirational lifestyle has been a predominance of chasing performance, often at a significant transactional cost and impact on investment results.
Much ado about millennials (born 1981-1996 - in their 20s and 30s). There have been countless studies unpacking this generation’s traits. Rightly so, considering millennials will make up half the workforce by 2020.
Millennials have been shown to be motivated by meaning and experience, with a drive for self-development. Led by a sense of purpose, they also thrive on affirmation, expecting continuous feedback and full transparency. They’re adept at tech and immersed in social media, which has given rise to an expectation of immediacy. And they’re passionate about causes: they’ve logged more volunteer hours than Xers and Boomers combined. Thus, they’re all about ‘money with meaning’.
Millennials are also faced with the prospect of ongoing ‘black tax’ as South Africa’s rising unemployment rate (currently officially over 27%) requires those with jobs to support a wider family of those without. This has been exacerbated by the cost of tertiary education with most millennials required to pay back student loans.
Investing styleImpact investing has increased significantly, with millennials choosing to invest according to their values. Additionally, they are the first generation that is likely to completely overcome significant home bias, becoming true global citizens.
Gen Z (born 1997-2018 in their infancy, teens and early 20s) is still a bit of an enigma. Members of this always-on generation are highly tech competent and very adept at multi-tasking. They have a natural affinity for entrepreneurship and grew up in a world of pervasive social media. They’re supposedly slightly cynical, but just as committed to experiences and finding meaning as their millennial predecessors.
Investing style:Still to be fully revealed, it’s likely Z’s will favour tech-driven investing and, in particular, the changes that occur as a result of the fourth industrial revolution and artificial intelligence. The growth of the gig economy may also have interesting consequences for how the ecosystem of formal vs experiential learning, income vs rewards, consumption vs savings and longevity may alter the whole concept of retirement.
At its heart, investing is the very essence of a capitalist framework, where generating returns above inflation allows the patient investor to put aside enough for the day when he or she no longer earns an income. As such, a society that requires formal retirement will require formal investment – and this is likely to be with us for at least another 20 to 30 years.
