Millennials’ investment patterns can change the world
One of the greatest challenges for banks and wealth managers is perhaps attracting millennials, society’s young adults that are repeatedly correlated with words like “tech-savvy,” “self-absorbed,” and “free spirited.” However, the question is why financial services focus so much on millennials. The population of millennials has been continuously rising over the past years and currently millennials are the largest generation.Furthermore, until 2020, the aggregated net worth of global millennials is expected to be more than double than the one of 2015, approaching $24 trillion [1].
To capture this growing market, financial services are looking at the characteristics that set millennials apart from previous generations investment-wise. It is really the societal circumstances and the series of global events that took place while millennials were growing up and have played a major role in forming their investing approach. In the following article, we identify two patterns that shape Millennials’ approach to investing.
The first pattern is related to the preference towards digital wealth management services.
This generation has been familiarized with technology since their early childhood and technology constitutes an inextricable part of their lives. As such, they can easily understand and adapt to new technologies and are more than willing to embrace tech innovation. As reported by Goldman Sachs, 50% of millennials count on fintech startups to overhaul banks [2]. In other words, millennials expect that, through partnerships with fintech startups, large banks will offer new digital ways to invest or manage finances. Another study [3] finds that 59% of millennials in the UK are likely to use an online platform to manage their saving.
The second pattern is increased interest for sustainable investing. Millennials seek to combine financial returns with positive impact.
A report published by UBS states that millennials are two times more likely than the average person to divest from a company that does not meet sustainability practices (e.g. companies that rely heavily on fossil fuels)[4]. Morgan Stanley also reported that 86% of Millennial investors are interested in sustainable investing. According to the same report, millennials are twice as likely as the broader investment population to invest in companies targeting social or environmental goals [5].
After all, millennials are the generation that is the most concerned about the well-being of the planet. The main reason for this is that they are and will be experiencing the effects of climate change and how much harm it can cause. A poll commissioned by the Clinton Global Initiative and Microsoft found that 66% of millennials think that there is solid evidence the earth is getting warmer, and 75% of those respondents believe that human activity is responsible for it [6].
Furthermore, 87% of millennials believe that environmental, social and governance factors are an important when deciding among investment opportunities, compared with 65% of Gen X and only 48% of baby boomers, according to a recent survey from US Trust Bank of America [7].
Millennials therefore are the agents of change in the investment industry. Over the next years, we expect that there will be a shift in the financial industry following their investment patterns.
We have identified two of them:
Pattern 1: Amplify the digital aspect; millennials wish to spend less time at the desks of financial advisors and more time making decisions themselves or monitoring their portfolio through their digital devices.
Pattern 2: Focus on impact and sustainability. Millennials seek to combine competitive financial returns with positive impact.
At Parity Platform we have positioned ourselves to be catalysts of this paradigm shift. We have developed a digital platform that connects investors with vetted renewable energy projects. We offer our platform to select banks and investment services firms, making investments with positive environmental impact accessible to a larger part of the economy.
Subscribe to gain early access.
Icons designed by Dinosoft Labs, monkik, freepic, Smartline and Eucalyp on www.flaticon.com
