Baby Boomers Half the MarketFor Investment via Computer

Surfing the Internet is second nature to members of Generation X, but that doesn't make them the best prospects for companies that hawk investment products on-line.

Baby boomer households are the real gold mine, making up nearly half the potential market for PC-based financial services, according to a survey by SRI Consulting, a unit of SRI International, Menlo Park, Calif.

That's because people in the 34 to 50 age group have the ideal mix of technology savvy and interest in investment products, said Larry Cohen, director of the consulting firm's consumer financial decisions group, based in Princeton, N.J.

By contrast, Mr. Cohen said, Gen X-ers-those aged 18 to 33-lack the "breadth of financial needs" of the baby boom crowd. Gen X-ers represent only 8.5% of the market for on-line financial services, the study found. Not surprisingly, the survey also concluded that those born before 1946 are less comfortable with technology.

In total, more than 16 million households "have the motivation or the capability to use on-line financial services," said Mr. Cohen.

Out of this national market, however, it's the presence of the babyboomer generation that is being felt by brokerage firms that have set up shop on the Internet.

"Our whole market is baby boomers," said Rebecca L. Patton, a senior vice president with E-Trade Group, a Palo Alto, Calif.-based on-line investment company. "There is an attitudinal difference among the baby boomers. They are really interested in taking more control over their financial affairs and being more involved."

At discount brokerage Charles Schwab & Co., the average age of customers is 47-squarely in the baby-boom camp. But the company doesn't focus its on- line efforts on that generation or any other.

"The way we develop our on-line services is for the widest spectrum of investors," said Tom Taggart, a spokesman for San Francisco-based Schwab.

By providing mutual funds and bonds on-line as well as stocks, the company wants to "capture the mass market, not just the active stock trader," he said.

The SRI survey's results also show that baby boomers with children under 12 are an even more lucrative market for PC-based investment products.

Many members of this group delayed having children and concentrated on their careers. They are thus more likely to have "more experience on the job in which they were exposed to computers," Mr. Cohen said. Households with young children also more likely to have a computer at home, he added.

But not everyone believes in the marketing potential of this generation. The baby boomers have "actually showed the lowest propensity to use the Internet for any on-line commerce," said Gary B. Meshell, director of electronic financial services at Price Waterhouse. Furthermore, he said, these households have already made most of their investment decisions.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER