The Hindu Business Line : One in two GenXers works with an investment professional of some kind

IF A MAN is proud of his wealth, he should not be praised until it is known how he employs it, said Socrates. A common method of employing wealth is the DIY or do-it-yourself way, betting on the gut and good friends, though pitfalls are many. Which explains why there is a movement towards formal financial planning, as evidenced by a recent study, the `MainStay Across Generations Survey (2005)', conducted by an online research firm, polling 1,537 people aged 26 to 82, about "their investment attitudes, behaviours, objectives and priorities."

There are helpful insights to draw upon, though the respondents were US residents with a total net worth of at least $100,000, as one learns from www.nylim.com, the site of New York Life Investment Management, a company with "more than $190 billion in assets under management as of May 31, 2005."

The most important finding of the survey is that half of GenX investors, 46 per cent of Boomers and 45 per cent of Matures believe they "need the help of professionals," up roughly 10 per cent across the board from 2004, notes the press release. GenX is defined as age 26 to 40, Boomers belong to 41-59 bracket, and Matures lie within the 60 to 82 slab.

It is not only that across all age groups, investors are asking for help to manage their investments; they're looking for `more comprehensive financial planning'.

Even those who aren't currently planning are increasingly aware of the need for a financial plan in the future.

MainStay has found that the aggressive trend of 2004 is giving place to a more conservative approach.

"Following this, 26 per cent of GenXers report their investment styles as conservative in 2005, up from 19 per cent in 2004. Similarly, 40 per cent of Boomers and 49 per cent of Matures now identify themselves as conservative investors, up from 28 per cent and 39 per cent, respectively, in 2004." Looks like conservativeness is the in-thing!

The study warns that it may not be all that wise to change your investment approach, and shift assets "based on the recent history in the capital markets". Instead of increasing your returns, this can more likely damage your long-term financial well-being in comparison to those who follow a comprehensive financial plan, according to Beverly Moore, Managing Director of Wealth Strategies at MainStay Investments. "We're seeing a real disconnect between investors' attitudes and their lifetime goals. They're driving by the rear-view mirror," alerts Moore.

The top reason that holds almost half the investors from planning is lack of discretionary income. Next come excuses such as procrastination and/or lack confidence. One in ten GenXers and Boomers admitted that they simply "haven't gotten around to" saving/investing more, while one in seven GenXers and Boomers conceded lack of "enough time/financial knowledge to make prudent investment decisions".

If that's the flip side, the positive is striking: that approximately one in two GenXers work with an investment professional of some kind! And, one in five "expects to begin working with a financial advisor over the next three to five years."

Is everybody putting money in real estate? Real estate behaviour closer home is different, one may aver; true, and we'd need data on spending behaviour of different age groups here.

However, a revealing finding from the survey is a sharp drop, contrary to media reports of "a never-ending real estate boom". Citing numbers that in 2005, only 13 per cent of GenXers plan to add real estate, compared to 32 per cent in 2004, the report asks if this is `a sign of cooling' and whether `real estate is losing its sizzle'.

Moore's quote cited in the press release points to `some very real opportunities out there for advisors to help investors select other investment options' because "if they aren't sinking large sums into real estate, they have to put it elsewhere." That `elsewhere' is not the stock market, it appears, because the survey found, "GenX and Baby Boomer investors — a combined population nearly 133 million — are holding cash out of the market", moving to the sidelines.

That's all the more reason for financial advisers and wealth planners to move to the frontline, to make their own wealth too in the process.

Since our professional institutes focus on cost and accounting, law and audit, we may need a new body to train people for this special job, say, an Institute of Certified Wealth Managers of India.

AccountSpeak@TheHindu.co.in

D. Murali

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