Every child is born into a world that is vastly different to the one in which their parents arrived. This is particularly true over the last 100 years, as technology continues to revolutionise almost every area of our lives.
With each generation comes a new set of priorities, attitudes and values, which are guided by the prevailing economic, social and political discourse of the time. Successful businesses are typically those that understand and appreciate these multigenerational differences and tailor their goods and services to cater to varying needs and desires.
Generational investing is an area of wealth management that Affinity Capital finds especially fascinating. Meeting with high-net-worth individuals from different backgrounds, hearing their unique stories and building strong partnerships is one of our favourite parts of working in the investment space.
Millennials have grown up with technology and continue to embrace IT and digital development.
However, it's not just an enjoyable part of the job; we genuinely believe understanding generational characteristics is essential if wealth managers and financial advisers want to succeed in the future. So how are the generations divided? And what specific traits do they possess?
Let's have a look at some of the common ways social researchers and analysts separate people into generational demographics, as well as the behaviours often attributed to them.
Also known as the Greatest Generation, these individuals lived through the traumas of the Second World War. Many were also alive during the First World War, while a brave few may even have fought in both conflicts. They also suffered through the Great Depression.
Clearly, the GI Generation was accustomed to hardship and sacrifice, yet they overcame great adversity and understood the power of unity. It's unlikely that wealth management firms will encounter many people from this generation – the youngest of which are over 90 years old – but they remain important for their role in shaping future socio-economic trends.
People in this group have the dubious honour of being caught between two more highly recognised demographics – the previous GI Generation and the upcoming Baby Boomers. The Silent Generation name may have a number of origins, although it is typically attributed to Time magazine, which wrote an article claiming this cohort were hard workers who kept quiet.
This generation had notably better health and welfare than their parents and grandparents. According to Bloomberg, they also benefited from rising house prices, diversified investment portfolios and higher stock values after emerging from economic depression.
Until this year, the Baby Boomers were the largest living demographic in the world. Sometimes referred to as the Me Generation, they grew up in a time of prosperity and affluence. Here in the UK, they were born in free NHS hospitals and benefited from extremely generous defined-benefit pension schemes.
While often described as non-conformists that shirked traditional values, Baby Boomers also experienced a level of financial security that bred optimism. The cohort has more disposable income, was the first generation to holiday abroad and was exposed to the first wave of consumerism.
Like the Silent Generation before them, Gen X is a middle-child that sits between the two larger groups of the Baby Boomers and Generation Y, otherwise known as Millennials. They are often described as cynical, with this mentality shaped through huge scandals such as Watergate and Enron.
Highly independent, Gen X benefited from a free education, but they were one of the first generations thought to be less wealthy and successful than their parents. Many analysts suggest they crave structure and order in the workplace, yet are suspicious of authority figures.
Gen Z is predicted to place significant importance on education and volunteering.
Millennials have grown up with technology and continue to embrace IT and digital development. While they are typically considered the selfie generation, who are happy to share every part of their lives online, Gen Y members also strive for equality and corporate social responsibility.
Increasingly globalised, they work hard but want jobs that have meaning, as well as a balanced home life. Importantly, many Millennials entered the workplace – and continue to do so – at a time when there is huge economic volatility and global economic uncertainty. In other words, they know there's no such thing as a free lunch.
While it's difficult to tell how the youth of today will behave from a professional and financial standpoint, some experts predict they will be careful with their money. Unlike Millennials, who were hit by the financial crisis unexpectedly, Generation Z is under no illusions about the unpredictability of economic markets.
Nevertheless, they are a demographic that was born entirely into a world of smart technology and have a certain entrepreneurial spirit. Gen Z is also predicted to place significant importance on education and volunteering.
Organisations that are able to tap into these multigenerational trends are much better placed to offer clients and consumers the products and services that fit their specific life objectives. This enables businesses to build strong, long-term relationships with new generations and maintain competitiveness.