FX firms ignore Generation X at their peril! We give our take on Goldman Sachs researcher Hugo Scott-Gall’s findings

They are in the sweetspot for consumption and are at an age where consumption peaks. They are making very important spending decisions, big ticket spending decisions” – Hugo Scott-Gall, Goldman Sachs Head of Thematic Research.

The way that brokerages in the electronic trading business develop and evolve their products in order to capture the imagination of the latest, highly technologically literate new generation of retail traders is very interesting indeed, and is as interesting as it is business critical.

Over the last few years, massive resources within marketing and product development departments have been channeled toward not only ensuring that companies master the evergreen conundrum of how to reduce the acquisition cost of clients, engage them with top quality, leading edge technology that improves their trading experience and subsequently retain them, but also toward looking toward the future, and in particular how to onboard the Millenials – the generation of the global population who not only grew up with the latest technology, but were born with it.

Enhanced mobile-led solutions, geotargeting, animated online education tools, complex and sophisticated charting and news aggregators are all ultra-modern, value proposition-enhancing features that today’s young and urbane traders who are not old enough to remember the days of analog pen-and-paper financial markets systems now demand, engage with and use on a regular basis with aplomb.

Yes, the Millennials are a critical client base. Catering to their requirements is the future-proofing of the industry, and there are several million of them worldwide who are educated, eager to be self-sufficient and will embrace new and innovative trading solutions and methodologies.

This is all great, and is indeed vital to all firms, however, what about Generation X? The people whose median age is now 45. The quiet generation of Reagan and Thatcherite small c conservatives who first set their sights on a green-screen computer at the age of 15, and did not own a cellphone until they were well into adulthood. The generation that has weathered financial crises and post-1980s austerity. The sensible but small generation.

People between the ages of 35 and 50 are still a vital demographic to investment companies, largely because of their different approach to spending and consumption to that of their parents and that of the 1990s laisse-faire generation that succeeded them.

Approaching those of the Generation X is not the same as approaching the baby boomers who were teenagers in the mid 1960s, and are now retired parents of members of Generation X, nor is it the same as approaching the Millennials.

An industry professional who agrees with this is Goldman Sachs Head of Thematic Research Hugo Scott-Gall, who has provided an insight into why Generation X is a vital demographic.

Indeed, they may not be engaged by the latest graphics-heavy GUI, or respond to geotargeting by ultra-modern and on the pace marketing departments, but their investing potential is higher than that of both their parents and children. Mr. Scott-Gall explains why this is.

“Generation X is the genration born between 1965 and 1980, and they are a demographic which is smaller than the baby boomers and the Millennials” he said.

“They are in the sweetspot for consumption and are at an age where consumption peaks. They are making very important spending decisions, big ticket spending decisions” – Hugo Scott-Gall, Head of Thematic Research, Goldman Sachs

Mr. Scott-Gall continued “So economically they are very significant. People of the Generation X account for 25% to 30% of all consumption in the US yet they are the least talked about generation. It is therefore very important for companies to look at how are htey spending differently, where are they spending more, and where less than the baby boomers that went before them.”

“Members of Generation X are are spending more on their children, which is fascinating. Education has become expensive, but they are overweighting that as an important category of expenditure, so broader children realted expenditure is a growth area compared to previous generations.”

Mr. Scott-Gall also stated “They spend more on housing. This is partly due to price inflation, as houses and general accommodation costs more these days, however they are spending less on cars, as only 3.5% of their income is spent on cars, significantly less than the previous geneation which spent 5.5% on cars. This is a big difference so if you’re a car company this is a key demographic you have to care about.”

It therefore should be noted that as education and property investment is more of a priority for this generation than depreciating consumer goods such as cars, their propensity toward understanding what is of investment value and what is not is generally higher than that of the generation either side of them.

Hugo Scott-Gall, Goldman Sachs

Mr. Scott-Gall emphasizes that lessons learned during a difficult and fluctuating economic period has led to the astute approach of Generation X “Generation X had a tough time” he said.

“You could argue that they have been unlucky” continued Mr. Scott-Gall. “They saw two big falls in the equity market, end of the bull market that peaked in 2000 and 2001 and then the financial crisis of 2008 and 2009. These were scarring and very significant events, and they have changed the attidude of Generation X toward how they save and how they invest. they are more cautious and more frugal than the baby boomers.”

“How they choose to spend the money that they have, how much they have saved as they need to plan toward retirement, all of those things are going to impact overall consumption” explained Mr. Scott-Gall.

In conclusion, Mr. Scott-Gall explained that this is a vital demographic for companies to pitch their products toward. “Yes you may not hear about them, yes you may not read about them or write much about them but they really do matter for consumption so how they evolve over the next ten years and how much they spend and how they spend really does matter.”

Image courtesy of governing.com

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