Senior-citizen portfolios are nearly doubling the returns of millennials this year

TD Ameritrade breaks down the most popular stocks held by four different generations

Young people might like to say that their elders don’t understand them, just as baby boomers and senior citizens may be mystified by the antics of those wacky millennials, but when it comes to stocks, the generation gap is pretty much nonexistent.

According to data from TD Ameritrade, which mined the holdings of its retail clients, there is a high overlap between the top 10 holdings of the millennial generation, Generation X, baby boomers and senior citizens, though there’s also enough divergence that the gains of seniors this year are nearly double that of millennials.

Five stocks are a top-10 holding for all four generations: Apple, Facebook, Amazon, Microsoft and General Electric. Another three — Berkshire Hathaway (the class B shares), Bank of America and Exxon Mobil — are held by three of the four.

–– ADVERTISEMENT ––

Apple is the top stock for each generation, which shouldn’t be surprising. Not only is it one of the best-known brands in existence, and a stock that has risen in fairly uninterrupted fashion for years, but it is the largest U.S. company by market cap. As such, it is a core component — if not the top holding — for dozens of equity-based mutual funds and exchange-traded funds.

Similar reasoning could account for the other names, all of which are among the top 20 largest U.S. companies, as well as being bellwethers in their respective industries.

In each generation, there is at least one stock that isn’t a top 10 holding for the others. For millennials, there are two: Walt Disney Co. and Tesla Motors. While the former is a Dow component and just as established as the more widely held companies, it could have particular appeal to younger investors, given they are the primary target audience for such Disney properties as Marvel, Pixar and “Star Wars.” Electric-car maker Tesla, on the other hand, could be a popular choice given the predisposition of millennials to environmentalism. (That said, Tesla appears just below oil giant Exxon among their holdings.)

Disney and Tesla have been under pressure this year, with both down more than 10% in 2016. That has resulted in millennials posting the worst year-to-date performance of any generational group (assuming an equal weighting of holdings), though all four age groups beat the 4.7% gain of the S&P 500 SPX, -0.17%  

Surprisingly, the generation of “Netflix and chill” doesn’t hold the streaming-media company as a top-10 holding. Instead, that outlier belongs to Generation X, where it is the generation’s eighth-most widely held company. The other company unique to Gen X is Google parent Alphabet Inc., which actually takes up two spots, with both its class A and its class C shares charting.

Baby boomers only have one outlying company, but it’s one that defined the technological progress made throughout their lifetimes: the old-school technology giant Intel Corp.

Seniors citizens were the only generation to eschew Berkshire, run by the 86-year-old legendary investor Warren Buffett. They were also the generation with the most unique portfolios relative to the other age groups. Three of their top 10 holdings don’t appear in the other generations: Johnson & Johnson, Verizon Communications and tobacco company Altria Group.

Telecommunications and consumer staples are both considered defensive industries, meaning they outperform in market downturns. The sectors also tend to offer dividend yields above the broader market, which has contributed to seniors’ year-to-date outperformance, as dividends have become a popular investment strategy amid low bond yields.

J&J, Verizon and Altria, in addition to being well-established brands, could reflect a preference on the part of seniors for a more conservative allocation. Younger investors, in contrast, can afford to be riskier, having more time to make up for any portfolio volatility.

See the top 10 holdings of each generation below.

Rank	Millennials	Generation X	Baby Boomers	Senior Citizens
1.	Apple Inc.AAPL, -2.25%	Apple Inc.	Apple Inc.	Apple Inc.
2.	Facebook Inc.FB, -0.94%	Facebook Inc.	Facebook Inc.	AT&T Inc.
3.	Amazon.com Inc.AMZN, -1.51%	Amazon.com Inc.	Microsoft Corp.	General Electric Co.
4.	Berkshire Hathaway Inc.BRK.B, +0.36%	Bank of America Corp.	General Electric Co.	Exxon Mobil Corp.
5.	Walt Disney Co.DIS, +0.80%	Microsoft Corp.	Amazon.com Inc.	Microsoft Corp.
6.	General Electric Co.GE, +0.77%	Berkshire Hathaway Inc.	AT&T Inc.T, -0.74%	Facebook Inc.
7.	Microsoft Corp.MSFT, -0.59%	General Electric Co.	Bank of America Corp.	Johnson & JohnsonJNJ, +0.53%
8.	Bank of America Corp. BAC, +0.90%	Netflix Inc.NFLX, +0.36%	Intel Corp.INTC, -0.51%	Altria Group Inc.MO, -0.29%
9.	Exxon Mobil Corp.XOM, +0.43%	Alphabet Inc. (Class A shares)GOOGL, -0.78%	Exxon Mobil Corp.	Verizon Communications Inc. VZ, -0.44%
10.	Tesla Motors Inc.TSLA, -0.05%	Alphabet Inc. (Class C shares)  GOOG, -1.06%	Berkshire Hathaway Inc.	Amazon.com Inc.
Average year-to-date return	5.35%	9.1%	8.7%	10.2%

Data Source: TD Ameritrade

By Ryan Vlastelica

Source :http://www.marketwatch.com/story/senior-citizen-portfolios-are-nearly-doubling-the-returns-of-millennials-this-year-2016-10-26?mod=MW_story_top_stories

Advisors brace for the $30 trillion 'great wealth transfer'

No issue looms larger for the financial advice industry than demographics and the aging of the baby boomers.

Over the next several decades, the biggest and wealthiest generation in U.S. history will transfer roughly $30 trillion in assets to their Gen X and millennial children, and if studies are accurate, most of those children will promptly fire their parents' advisors.

"Studies regularly show that when wealth passes to another generation, in the majority of cases, the heirs change financial advisors," said Gauthier Vincent, head of Deloitte's U.S. Wealth Management practice. "The relationship between assets, asset owners and financial advisors is unraveling before our eyes."

Jonathan Nutt | Getty Images

How advisory firms deal with this long-term trend will determine which succeed in the future and which falter. As the 'great wealth transfer' accelerates — the oldest boomers are now 70 years old — the strengths of some business models will become more apparent and the weaknesses of others more glaring.

"This is a fascinating time from a competitive perspective," said Vincent. "There's going to be winners and losers, and market shares will shift."

He added, "This industry will be very fluid in the next decade."

For an industry that has largely earned its bread serving affluent clients — and avoiding smaller, unprofitable ones — it's been easy to put addressing this huge but slowly unfolding issue on hold.

"It's a question of revenue today versus revenue tomorrow," said Kendra Thompson, North American lead at Accenture Wealth Management Services. "Incumbent players are not by nature nimble and willing to take risk."

"There's a perception in the industry that to be successful, you can only work with people who have at least $1 million in assets. But if you don't work with the next generation, someone else will."-Peter Mallouk, CEO of Creative Planning

There's good reason for the inertia. Next-generation clients with fewer assets may be the future of the industry — every advisor acknowledges the fact — but they won't pay the bills today. Trying to attract and engage them costs money; it takes a lot of people and demands new technologies and service models. 

"Is it the right thing to do?" asked Peter Mallouk, CEO of registered investment advisor Creative Planning. "Yes — but you have to be willing to not be profitable with the mass affluent."

He added: "The majority of the industry is not designed to think generationally. Economically, it's not worth it."

Mallouk and his firm, one of the largest and fastest-growing RIAs in the country, have a leg up on most advisors. Their clients are generally high in net worth, they successfully recruit young advisors to the firm, and they offer the high-touch, full-service financial-planning relationships that are most likely to retain assets through generations.

Mallouk said involving the children of clients in financial-planning discussions is the norm at his firm. "There's a perception in the industry that to be successful, you can only work with people who have at least $1 million in assets," he said. "But if you don't work with the next generation, someone else will."

Daisy Medici, managing director of governance and education at GenSpring Family Offices, focuses on engaging all family members of the firm's ultrahigh-net-worth clients. The parents in those families expect it, and working with next-gen clients is an essential part of what a family office does. 

"We attract families that worry about the impact of wealth on the next generations," said Medici. "They come to us because we're known for bringing multiple generations of families to the table."
There are no guarantees, but if advisors can bring young family members to the table now, those children are more likely to stick with their parents' advisors down the road when they inherit assets. The trick is building the business model to do that for the future without bankrupting the firm in the present.