When fashion industry entrepreneur Jarrod Kahn first decided he needed help managing his finances, he signed up with his father's long-standing advisor. While he appreciated the conservative, steady approach that had worked well for his parents, Kahn, 39, felt he was missing out on the gains that his friends were enjoying from a more aggressive style. "I felt that I was a lot younger than my dad and I was just looking to be a little more aggressive [and] a little more diversified," says Kahn, who has shifted his account to financial advisor David Binstock at Oppenheimer. He now enjoys a diversified portfolio that includes investments in hedge funds and real estate.

Kahn's experience is far from unique among Generation X clients (roughly between the ages of 28 and 42). According to Northern Trust's 2008 Wealth in America study, Gen Xers have a markedly different approach to investing from their parents and grandparents. Not only are they unwilling to blindly take on their parents' financial counselors, they're also opinionated about the attributes they look for in an advisor when they strike out on their own. From a round of interviews with the young jet set and their advisors, it became clear that past performance and impressive returns aren't sufficient to gain a Gen X client's business. What's even more important to this generation is a feeling of assurance that the individual advisor has integrity and trustworthiness. As a result, these clients tend to rely more heavily on recommendations from friends and colleagues when making their selections. They are more likely than previous generations to use their personal lives as networking possibilities, down to their children's soccer games and other sports events.

Gen X investors also have shown an enthusiasm for alternative investment vehicles, such as hedge funds and currency funds, that has largely escaped their older counterparts. Just like the early baby boomers who invested in plastics because that's what was hot in their day, today's Gen Xers came of age when alternatives were all the rage. And that, at least in part, has shaped their investment outlook.

Advisors agree that their younger clients are more likely to be aware of these investments than older clients, who tend to cling to the traditional stocks/bonds/cash portfolio construction. Michael Dadich, a Los Angeles-based advisor with Oppenheimer & Co., says it's harder for older clients to accept alternative investment tools that have become popular over the past decade or so. "For younger clients in their thirties, it's all they know. It's normal for them," he says.

Indeed, according to Northern Trust's survey, Gen X households have an average of 23% of their assets in alternatives, compared with 13% for boomer households. And the more aggressive Gen X approach is most noticeable in some of the specific asset allocations. For example, 15% of Gen Xers have invested in structured notes while just 6% of boomers have done so; 14% of Gen Xers have invested in currency funds compared to 6% of boomers; and managed futures funds have enticed 15% of Gen Xers versus 7% of boomers.

One observation that emerged from the interviews with advisors and their Gen X millionaire clients was that most younger customers are generally thought to require less liquidity than their older, retired parents and grandparents. They can afford to tie up their funds in alternative investments that may have a 10-year time horizon.

But there was also some disagreement with this rule of thumb. Greg Ghodsi, 44, an advisor at Raymond James & Associates in North Tampa, Fla., who oversees about $250 million in assets, doesn't generally use alternatives with his younger clients in the $2 million to $3 million range. "When you're dealing with younger people with growing families, expenses tend to be higher than they anticipate," he says. "They could also have times when they're between jobs or want to start a business. If their money is tied up in alternatives, it pinches a person." On the other hand, for older clients, Ghodsi says he recommends putting around 5% to 10% in alternatives.

If younger clients do want to invest in alternatives but are concerned about tying up their cash long-term, some advisors recommend setting aside an emergency fund. Dadich, and his partner, David Binstock, require that clients keep at least six months of living expenses in short-term cash to cover emergencies, such as the loss of a job.

Sometimes, a Gen Xer's zeal for alternative investments can go too far and needs to be reined in. Shane Brisbin, an advisor with Smith Barney in San Francisco, says that some of his clients demonstrate a little too much tolerance for risk. "Many of our clients are business leaders and natural risk takers. Sometimes we have to encourage them that they don't need to take that much risk in their personal finances." Still, Brisbin, who oversees about $2.3 billion in assets, is a proponent of alternatives provided they suit the individual client's needs. About 40% of his clients are under 45 and are primarily involved in technology, venture capital and private equity.