As senior managing director of retail distribution for a major investment management firm, people sometimes ask me what keeps me up at night.

Geo-political turmoil?  Market mayhem?  A global recession that drives asset valuations down to levels below what we experienced in the financial crisis?

Sure, all those things are worrisome, but they also are beyond my control.  What worries me most when I read research reports and survey results on investor attitudes and behavior, is the risk that we could lose a generation of investors.

Why do I say that?  The evidence suggests that, for members of the young adult population, after experiencing a negative return for stocks during the first decade of their investing careers, many are turning their backs on equities, even as their long-term financial needs require returns that cannot be achieved in such alternatives as cash or government bonds.

Even as we approach the end of a fourth year of market recovery that has seen stocks double in value from their low in the crisis, younger investors we survey continue to report higher allocations to cash as an investment than do their older cohorts.  Industry fund flows last year also continued to skew heavily toward fixed income and away from equities.

This presents particular challenges to you as an investment advisor.  For years you've built your practice around talking to clients about investing.  The terminology is second nature.  Stocks for the long term.  Grow your capital.  Diversify across asset classes to dampen volatility.

You probably never thought your investment recommendations would be competing with an alternative that offers negative real returns.  Or that your recommendations would be losing.

Furthermore, with your voice of experience telling you that younger investors should be more heavily weighted in stocks, it probably also didn't cross your mind that the age cohort opting for that money-losing savings option would be Generation Y, those in their 20s to early 30s.

But you'd be wrong.

In the latest findings from our MFS Investing Sentiment Insights series, respondents from this younger generation on average allocated 29 percent of their portfolio to cash – higher than the cash levels reported by  Generation X (age 33-47), the Baby Boomers (48-66), and retirees (67+).

When asked what type of investment would be a good place to put their money over the next 12 months, 49 percent of Generation Y responded Bank CDs, savings or money market accounts, far higher than the preference for this option stated by each of the older cohorts.  In fact, the savings option exceeded Generation Y's vote for U.S. and international stocks, real estate, alternative investments, government bonds and ETFs.

This is consistent with our earlier findings on investor sentiment which we have been monitoring for the past five years.  In short, younger investors have experienced a painful decade for stocks during the formative stage of their investing careers.  Many have seen their parents struggle with home values that are underwater and an inability to retire when they had intended.

Stocks for the long run?  Forget about it. This group wants safety, protection of capital, and income.  They like the bank because it offers deposit insurance and they can check their balances at the ATM anytime they like.

Which is not to say that some cash cushion for peace of mind is a bad thing.  But when you consider that the investor sentiment findings show this group shares many of the same worries as their older cohorts -- rising healthcare costs, inflation, higher taxes – the question naturally arises as to how much do you allocate to the asset that returns almost nothing.

Part of the problem is that members of Generation Y appear to be deceiving themselves about what that risk-free return really is.  The Investing Sentiment Insights findings showed this group expected an average return from a one-year CD of 3.5 percent, approximately 10 times the actual return.

Why do we care about this younger generation?  Because there are a lot of them, and contrary to popular thinking, they control a lot of wealth.  Much has been written about the 76 million Baby Boomers, the first wave of which is just entering retirement.  But many don't realize that Gen Y numbers 77 million.  Combined with the 54 million in Gen X, that's 131 million people, with a combined spending power equal to the Boomers – about $2.5 trillion a year.

So what can we in the advisory community do to avoid losing this generation as investors?

For starters, get away from the old saws like "invest for growth."  Growth is a word this group associates more with risk than with return, and so far risk has not seemed like a good proposition to them.  Keep in mind that 37 percent of this group told us they "never will feel comfortable investing in the stock market."  That doesn't mean they won't do it, just don't expect them to feel too cozy about it.

Instead, focus on protection.  We know they have worries about inflation; focus on how you can help them protect their portfolio's purchasing power over time.  Income also seems to strike a chord with this group.  Asked what they considered their most important investment objective, 33 percent of Gen Y said "generating income from my savings and investment," a higher number than any other age cohort; Gen Y also had the lowest response rate (other than retirees) for the option "growing assets/increasing my portfolio value."

Secondly, avoid industry jargon.  Too often we confuse investors with terms like absolute return, leverage, and long-short.  Investing Sentiment respondents said they frequently find investment products overly complex and are overwhelmed by different choices, even to the point of putting off decisions about their investments and savings.  What they would like to hear is a clear description of what a product is designed to do.

Thirdly, customize your advice for the younger client.  This is a group that wants solutions tailored to their needs, not pre-packaged products.  This doesn't mean coming up with a unique solution for each client, but rather making the client feel the investments you have chosen for them are customized because you have taken the time to interact with them and get a clear understanding of their needs.

Finally, don't overlook social media.  This is a group that wants advice, but constantly is on-line seeking validation.  They may be checking on you, so if you use social media sites, keep your content up to date.  Consider using e-mail and Twitter to alert clients to information you think may be useful or interesting.  You may even find social media sites helpful in finding new clients.

Douglas Bailey is Senior Managing Director of MFS Fund Distributors Inc. in Boston MFS, through Research Collaborative, an independent research firm, sponsored an online survey from August 29 to September 10, 2012, of 923 individual US investors with $100,000 or more in household investable (non-retirement) assets and 603 licensed US financial advisors (either FINRA or SEC) who have been licensed for at least three years with $500,000 or more in annual mutual fund sales. All investor respondents make or share in making financial decisions for their households. MFS was not identified as the sponsor of the survey. Generation Y investors are those under the age of 33; 193 participated in the survey. Generation X is defined as investors between the ages of 33 and 47; 256 participate in the survey. Baby Boomer investors are those between the ages of 48 and 66; 301 participated in the survey. There were 173 participants over 67 years of age.