Over the next decade we will witness the largest transfer of wealth in history; estimates say that millennials will inherit between $12 and $24 trillion worth of assets from baby boomers. This transition will undoubtedly change the business and investment landscape. But how do millennials differ from previous generations? And what are the top three things you need to know about them?
Who are millennials?
The definition varies across sources, however Deloitte defines millennials as individuals born between 1983 and 1994, approximately anyone currently aged 24 to 36.
What you need to know
1. Millennials are driven by purpose
When it comes to careers, dietary choices and where to shop, millennials are increasingly driven by purpose and impact. Research from Barclays finds that millennials are four times more likely to invest for positive social and environmental impact than older generations.
There is no definitive answer as to why millennials care more about responsible investing. However, growing up through the 2008 financial crisis and with greater access to information via the internet and social media, has no doubt raised awareness among millennials of global challenges such as climate change and human rights issues, and the role that business and society can play in overcoming them.
Platforms such as Nutmeg, Plum, Wealthsimple and Vanguard already offer sustainable products that allow individuals to invest in line with their values. And it is anticipated that more platforms will follow suit once providers can offer more diversified ESG portfolios.
2. Millennials are digitally native
There are many stereotypes about millennials, such as their addiction to avocado toast, inability to save and constant use of their phones. While some are debatable, one thing is certain, the average millennial in developed markets has grown up surrounded by technology.
Millennials use mobile apps to move around cities, track workouts, order dinner and do their shopping. It is no surprise then that the digital age has seen a proliferation of app-based investment platforms or ‘robo advisers’ that cater to millennial investors. These applications are typically characterised by user friendly interfaces, simple jargon-free language and minimal barriers to entry such as lower fees and low minimum investments.
Some industry incumbents are also embracing digital trends to keep up with startup innovation. For example Aviva, the multinational insurance company, have a ‘Digital Garage’ that harnesses data, technology and user-centered design to build products that serve millennial customers. And they have recently invested in Wealthify, an investment app that offers ethical funds.
Firms that want to attract millennials should consider incorporating cutting edge technology, gamification and mobile into their investment service offerings.
3. Millennial investors are diverse
Millennial women are set to be the most financially independent women in history. A 2018 study by The Share Centre found that in the UK millennial women are on average investing more money in their stocks and shares ISAs than men, however overall fewer women invest in the stock market. Why is this? Studies by BCG and EY found that women currently feel underserved by financial services. Other barriers include a self-reported lack of knowledge on how to get started and a lack of confidence.
With a decreasing gender pay gap, more financial freedom and a tendency to settle down later in life than previous generations, millennial women hold a lot of untapped wealth. A Barclays report found that female investors tend to outperform their male peers, and Morgan Stanley found that women show a greater interest in sustainable investing than men (84% versus 67%). With the right platforms, products, information and a more inclusive investment culture there is no reason why women should be investing less than men. An increase in female investors could have a positive impact on society and the planet.
The lesson here is to understand the importance of inclusivity and diversity when designing products for millennials. Platforms should consider this in their branding, communications and product design.
In Larry Fink’s 2019 letter to CEOs he writes that millennials, as employees and investors, will be a driving force for overcoming environmental and social issues. To attract this new generation of conscious and informed investors, organizations need to offer sustainable, digital and inclusive products. While we can’t predict the future, it is likely that businesses that are resistant to change will lose out.
If you enjoyed this blog post let us know. Stay tuned for more KKS research on this topic.