Gen X Loves ETFs, Too

Take it from a curmudgeonly member of Generation X, we're unloved. Well, maybe not “unloved,” but we of the Family Ties, Miami Vice, glam rock, grunge and East Coast/West Coast hip hop generation are pretty much ignored by the financial services community.

My two cents, and I'd wager far more because it is easy to substantiate, is that traditional asset managers, wire house brokers and yes, even issuers of exchange traded funds, are focused too intensely on garnering assets from baby boomers and millennials. Well, recent data suggest ETF issuers might want to have a closer look at what age group is buttering their metaphorical bread.

The 2015 Investor Brandscape™ study by Cogent Reports released Tuesday turns up some up important data for advisors and ETF issuers. Importantly, the data indicate Gen Xers are widely embracing ETFs and for some of the largest ETF issuers, whether they know and/or like it or not, Gen X is the demographic representing the highest user penetration.

“While Millennial and Gen X investors combined represent only 37% of affluent Americans, they comprise a majority (55%) of ETF owners. Nearly four in ten (38%) Millennials and one in five (21%) Gen X investors report owning ETFs, compared to just 14% of 2^nd Wave Boomers, 12% of 1^st Wave Boomers and 11% of Silent Generation investors. Furthermore, despite being an average of 8 years younger than non-owners (48 years vs. 56 years, respectively), investors who own ETFs have significantly more investable assets ($737,000 for owners vs. $512,000 for non-owners),” according to the Cogent report. 

Pulling out the nugget about about the average of ETF owners being 48 compared to the average age of non-owners being 56 years old, reveals that, well, the average ETF is owner is a GenXer. After all, millennial is defined as up to 34 years old while baby boomers start at 51.

And no, no one should scoff at the importance of millennials to the current and future growth of the ETF industry. Recent data confirm as much.

Released in late September, Schwab's 2015 ETF Investor Study, the company's fifth iteration of the study, shows that millennials are embracing ETFs more widely than other generations.

“The prominence of ETFs within an overall investment strategy is particularly pronounced among younger ETF investors. Millennials (aged 25-35) say that ETFs currently make up an average of 41 percent of their portfolios, compared to a 21 percent share among all investors. Sixty-one percent of Millennials plan to increase their investments in ETFs in the next year,” according to the Schwab study.

Still, the Cogent data, on an issuer-by-issuer basis, are telling about how important Gen X is to ETF issuers.

For example, only first wave baby boomers outpace GenX in terms of ownership of iShares and SPDR ETFs. Those are the largest and third-largest U.S. ETF issuers, respectively. At Invesco Ltd. IVZ PowerShares, the fourth-largest U.S. ETF issuers, 28 percent of ETF owners are GenXers, outpacing first wave boomers, the silent generation and millennials by at least 25 percent.

GenX represents 44 percent of Vanguard ETF owners, more than triple the issuer's penetration into the millennial demographic and more than double the ownership of Vanguard ETFs by either first or second wave boomers, according to Cogent data.

GenX also represents the largest demographic for the following ETF titans: WisdomTree Investments Inc. WETF, Fidelity, PIMCO and Schwab. Only First Trust, Guggenheim and ProShares show millennials as a majority, or plurality in the case of ProShares, as their largest demographics.