Boomer Clients Love Equities

Registered investment advisors spend ample time catering and working with baby boomer clients and that stands to reason because when getting down to brass tacks, this generation is one of the largest by population and, for the time being, the wealthiest.

For those that need a refresher, boomers are considered to be those folks born between 1946 and 1964. As of last year, there were 69.6 million Americans in the 58 to 76 age range, meaning they’d be 59 to 77 today. One way of looking at those figures – an accurate one at that – is that boomers are a mix of retirees, those are soon to be there and others that still have a few years left in the workforce.

In all cases, advisors should know what clients are investing in their discretionary accounts. A recent Gallup poll suggests the level of equity ownership (61%) among U.S. investors is the highest it’s been since just before the global financial crisis. There’s more for advisors to ponder and it’s highly relevant regarding older clients.

“Stock ownership rates among most key demographic groups are essentially back to where they were in 2008. One notable exception is among older Americans. U.S. adults aged 65 and older today (63%) are more likely than senior citizens prior to the Great Recession (2001 through 2007) to own stock (53%),” according to Gallup.

How Advisors Can Proceed

Of course, high levels of equity ownership among clients in their 60s and 70s flies in the face of the conventional wisdom that dictates that as a client ages, the more their portfolio should be allocated to fixed income assets.

On the other, conventional wisdom isn’t always the right wisdom and investors holding bonds – regardless of age group – were burned last year. Beyond that, advisors should take a step back and assess why so many boomer clients are comfortable owning stocks.

Acknowledging that many boomers started earning “decent money” for the first time in the late 1970s or early 1980s, it’s worth remembering that interest rates were around 16.6% when President Reagan took office in 1981. Sure, there have been tightening cycles over the years, but from 1982 through 2020, rates basically did one thing: Go down. Right or wrong, some boomer clients may simply be expressing the view that rates have more upside, meaning they don’t view bonds as safe.

Second, and arguably more importantly, bomber investors have experienced the resilience of equities. Think about what they’ve seen in equity markets since the 1980s: Black Monday, the early 1990s recession, the bursting of the dot-com bubble, the global financial crisis and the coronavirus bear market of 2020. In each instance, stocks rebound and went onto to notch impressive gains.

“Stock ownership rates are now back to where they were in 2008, likely because stocks have again proven to be a solid long-term investment and income gains among Americans have given them greater means to invest in stocks,” added Gallup.

Know Your Clients

In addition to risk tolerance, which obviously varies from client-to-client, there are some telltale signs regarding stock ownership.

For example, various studies confirm stock market participation is higher among higher earners that are married and have at least an undergraduate degree.

“More than eight in 10 Americans with an annual household income of $75,000 or more own stock, including 80% of those with an income between $75,000 and $99,999 and 84% of those with an income of $100,000 or more. About half of Americans in households earning between $30,000 and $74,999 own stock (51%), as do roughly one in four of those earning less than $30,000 (24%),” concludes Gallup.

Related: Helping Older Clients Avoid Financial Scams